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The
dollar had risen to a three-week high versus the Japanese yen
and rallied versus the euro after an overnight advance in
Treasury yields. But by the European open momentum in the U.S.
currency had fizzled along with a fall in U.S. yields. Trading
on Thursday is quieter with London markets shut for a UK
holiday.
By 1115 GMT, the dollar was down 0.4% against a basket of other
major currencies, while the euro climbed 0.4% to as high as
$1.0696, following two days of losses. The yen erased its early
weakness and was last at 129.74 yen per dollar, up on the day.
Data this week, stronger than expected in the United States, has
reaffirmed that the U.S. economy is likely to hold up better
than rivals even as the global economy slows.
"Robust U.S. data and an ensuing extinguishing of hopes that the
Fed would need to ease hiking expectations were behind the U.S.
Dollar rally," said Jeffrey Halley, an analyst at OANDA,
describing this week's European economic data by contrast as
"soggy".
But a record euro zone inflation reading this week adds to
pressure on the European Central Bank, which meets next week to
discuss policy, to act to tame price growth even if that means
weakening a slowing economy.
The Swiss franc gained 0.3% to 1.022 francs per euro, a
one-month high, after Swiss prices increased by their highest
level in 14 years during May. But it later gave up gains to
trade flat at 1.0263
The 2.9% reading may look modest versus the 8%-plus numbers in
the euro zone and Britain, but Switzerland is known as a country
with historically low inflation so it will further pressure the
Swiss National Bank (SNB) to address rising prices.
The franc had broken parity with the euro in March as traders
bet the ultra-dovish SNB would be forced to tighten and less
inclined to fight a strengthening franc.
Against the dollar the franc gained 0.5% to 0.9576, a two-day
high.
ANOTHER RATE HIKE
The Canadian dollar was little changed at C$1.2646 after the
Bank of Canada on Wednesday, as expected, hiked rates by 50
basis points and signalled more aggressive tightening to come.
Australia's dollar rallied 0.3% and sterling 0.6%, both helped
by improved investor sentiment across asset classes.
Despite Thursday's fall, many analysts still see the U.S. dollar
outperforming, especially if economic data supports a further
rebound in U.S. Treasury yields.
The U.S. currency's rally overnight was led by the U.S. 10-year
yield hitting a two-week high of 2.951% on Wednesday, after data
showed U.S. manufacturing activity had picked up in May as
demand for goods remained strong.
Traders are now looking to more U.S. employment data due later
Thursday and to Friday's U.S. payroll numbers.
(Reporting by Tommy WilkesEditing by Mark Potter, Kirsten
Donovan)
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