June 17 (Bloomberg) -- The dollar fell against the euro as traders pared bets the Federal Reserve will raise interest rates this year amid signs deflation is taking hold. The U.S. currency also declined versus the Singapore dollar and Norwegian krone as Fed fund futures indicated a drop in expectations for a rate increase at the December central bank meeting. A Labor Department report today may show consumer prices fell 0.9 percent in the 12 months through May. Norway’s Norges Bank will probably keep its benchmark deposit rate at 1.5 percent today. “It’s too early to talk about rate hikes and inflation when we still have deflation,” said Geoffrey Yu, a currency strategist in London at UBS AG, the world’s second-biggest foreign-exchange trader. “It’s highly unlikely the Fed will shift course and focus on inflation and the broader theme in the dollar is still down.” The U.S. currency fell 0.4 percent to $1.3889 per euro as of 9:30 a.m. in London. It slipped 0.1 percent to 96.31 yen. The Japanese currency weakened 0.3 percent to 133.79 against the euro after earlier strengthening to 132.56, the highest level since May 28. The Singapore dollar climbed 0.6 percent to S$1.4547 versus its U.S. counterpart, with the krone rising 0.3 percent to 6.4067 per dollar. Traders bet there’s a 49.7 percent chance the Fed will boost rates by at least a quarter-point to 0.5 percent at its December meeting, down from a likelihood of 64.1 percent a week ago, fed funds futures showed.

Source