The dollar has jumped this year as strong growth and sticky inflation lead traders to push back expectations on when the Fed will begin easing
The dollar index dropped on Thursday but came off of a three-week low as investors waited on new data catalysts for clues on when the U.S. Fed is likely to start cutting interest rates.
The dollar has jumped this year as strong growth and sticky inflation lead traders to push back expectations on when the Fed will begin easing. But after reaching a three-month high last week, the U.S. currency has been largely consolidating.
The dollar is likely to benefit from divergences with other countries as the U.S. economy looks comparatively stronger, said Noel Dixon, senior macro strategist at State Street Global Markets in Boston.
Nonetheless, after the recent strength “there is clearly some fatigue with some of the dollar bulls,” he added. For the dollar to break out one way or another we would need to see more data.
The dollar index was 0.03% lower at 103.95. It dropped to 103.43 earlier on Thursday, the lowest since February 2, and is holding below the 104.97 level hit on February 14, which was the highest since November 14.
Minutes from the central bank’s January meeting released on Wednesday showed that the majority of policymakers were concerned about the risks of trimming interest rates too soon as they seek to bring inflation near the 2% annual target.
Fed Vice Chair Philip Jefferson said on Thursday he will be looking across a broad set of economic indicators to convince him it is time to reduce interest rates, rather than focusing on a single metric.
U.S. data on Thursday showed that jobless claims unexpectedly dropped last week, while U.S. business activity cooled in February, with a measure of prices paid for inputs dropping to the lowest level in nearly 3-1/2 years.
