By Saqib Iqbal Ahmed NEW YORK, Dec 2 (Reuters) - The dollar regained ground against the yen on Tuesday, recovering from Monday's selloff, even as expectations for a December rate hike by the Bank of Japan lingered, while the euro treaded water after data showed euro zone inflation was slightly hotter-than-expected. The greenback rose 0.3% against the yen to 155.91, after hitting a two-week low on Monday, following a sale of 10-year Japanese government bonds which saw the strongest demand since September. "We’re basically back to where we started before Ueda’s remarks yesterday, which is maybe a bit perplexing considering that swaps still price about an 80% chance of a Dec hike," said Michael Brown, senior research strategist at Pepperstone. Stocks, bonds, cryptocurrencies and the dollar all tumbled on Monday after Bank of Japan Governor Kazuo Ueda said the central bank would consider the "pros and cons" of raising interest rates at its next policy meeting, sending Japanese two-year yields above 1% for the first time since 2008 and prompting a spillover into global bond markets. "To me, it speaks to everything still being very much USD-driven, with the pressure on the buck seen yesterday amid increasing expectations that (Kevin) Hassett will get the Fed Chair gig having given way to slightly more rational conditions today, as participants re-focus on what remains a solid U.S. growth outlook, even with a 25-basis-point Fed cut next week very much on the cards," Brown said. "It still seems that, in the absence of an obvious narrative, the greenback goes back to being the ‘cleanest dirty shirt’ and finds some healthy demand," he said. Data on Monday showed weaker-than-expected manufacturing data from the U.S., heaping pressure on the Federal Reserve to cut interest rates this month. Fed funds futures are pricing an 87% probability of a 25-basis-point cut at the Fed's next meeting on December 10, compared with a 63% chance a month ago, according to the CME Group's FedWatch tool. INFLATION WATCH The euro was 0.04% higher at $1.1615 after data showed inflation in the 20 nations sharing the euro accelerated to 2.2% last month from 2.1% in October, a small rise that is unlikely to be too concerning for the European Central Bank. Inflation in the euro zone is practically at the ECB's 2% target, ECB policymaker Joachim Nagel said in an interview published on Tuesday. "This (inflation data) comes at a time where some had claimed we could yet see another cut from the ECB, although the likeliness is that their easing cycle is over," said Joshua Mahony, chief market analyst at Scope Markets. Sterling edged 0.1% lower to $1.3202 , having touched its highest level in a month on Monday. The Bank of England cut the amount of capital it estimates lenders need to hold in a bid to boost lending and stimulate the economy in the first reduction to bank capital requirements since the financial crisis. Leading cryptocurrency bitcoin rose 7% to $92,321, pulling away from the 10-day low touched in the previous session. (Reporting by Saqib Iqbal Ahmed in New York and Joice Alves in London; Additional reporting Gregor Stuart Hunter in Singapore; Editing by Andrea Ricci and Nick Zieminski) (The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)
