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 Sterling was the standout in a morning of generally muted moves on
major currency markets, up almost half a percent on the latest
comments from Bank of England policymakers in support of higher
interest rates.
The dollar had sunk almost 1 percent in U.S. and Asian time on
Tuesday, hurt by poor earnings and the lack of more impetus for a
month-long surge driven by expectations the Federal Reserve will
raise interest rates by December.
It was broadly unchanged against both a basket of currencies and the
euro in morning trade in Europe.
"The dollar has definitely run out of steam for a moment," said
Piotr Matys, a currency strategist with Rabobank in London.
"Still, the fact that the Fed is going to raise rates at some stage
this year means we remain constructive. Sentiment towards the euro
is weak and we think it is a sell on the rallies."
The U.S. currency gained around 25 percent against the euro and a
basket of currencies between June of last year and mid-March, and
more analysts still think it will rise than believe it has run its
course.
But its inability to trade stronger than $1.08 per euro since April
is beginning to trouble those betting on a run to parity against the
single currency.
Bank of America Merrill Lynch's head of G10 FX strategy Athanasios
Vamvakidis said he remained bullish on the dollar, given his
expectation of a Fed rate rise in September.
"We have it at parity with the euro by the end of the year, but we
do not see it going much below parity," he said. "The long-term
equilibrium rate with the euro is around $1.20-1.30, so it can go
below that in times of policy divergence but not by so much."
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By GMT 0804, the dollar was less than 0.1 percent higher against
both the euro and a basket of currencies at $1.0927 and 97.376
respectively.
Against the yen it eased 0.1 percent to 123.76 yen , down from a
roughly six-week high of 124.48 yen on Tuesday.
Commodity currencies, including the Australian, New Zealand and
Canadian dollar, which have been hit by the dollar's rally in the
past month, were still on the back foot.
The kiwi fell 0.2 percent to $0.6616, just off six-year lows
reached last week, with attention shifting to a meeting of the
Reserve Bank on Thursday morning that is expected to cut official
interest rates at least a quarter point.
"The tables have turned a bit on NZDUSD traders with the sudden
introduction of dollar weakness," said John Hardy, head of FX
Strategy at Saxo Bank. "So if the RBNZ under-delivers on the
dovishness of its guidance amid further USD weakness, the risk grows
dramatically of a sharp squeeze."
(Editing by Larry King)
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