The dollar has gained nearly 6 percent against a basket of
currencies this year <.DXY> on the back of Fed rate increases,
but a recent softening of U.S. Treasury yields and tepid data
has led some to forecast a peak for the dollar.
"We think the Fed may be inching closer to a wait-and-watch mode
on the outlook for monetary policy," said Manuel Oliveri, a
currency strategist at Credit Agricole in London.
"Even in recent episodes of market selloffs, the dollar hasn't
been gaining as much, indicating investors are cautious about
pushing the greenback higher."
On Wednesday, the dollar was a touch higher at 97.40 but moves
were tiny in rangebound markets. The euro <EUR=EBS> rose 0.1
percent to $1.1334.
Gauges of risk appetite such as the Australian dollar <AUD=D3>
and the euro/Swiss franc <EURCHF=> were little changed.
Market expectations for Fed rate increases in the money markets
were barely for one more rate hike next year, even though some
banks such as JP Morgan expect the Fed to raise interest rates
as much as four times in 2019.
John Normand, head of cross-asset fundamental strategy at JP
Morgan, said short position on bonds are still prevalent, in
contrast to the long positions that should be held late-cycle if
the economy is expected to slow materially and the Fed set to
U.S. inflation data is the highlight of the day with headline
inflation forecast at 2.2 percent, accelerating slightly from
Sterling <GBP=D3> was the biggest gainer, rising 0.4 percent in
volatile trade at $1.2535, after Prime Minister Theresa May
vowed to fight a challenge to her leadership and warned rebels
within her party that they risked delaying or even stopping
Britain's departure from the European Union.[GBP/]
The Australian dollar, a gauge of broader risk sentiment, was up
0.2 percent at $0.7217 <AUD=D4>.
The 10-year Treasury note yield <US10YT=RR> inched up to 2.886
percent, continuing to pull back from recent lows.
The yield had dropped to a three-month low of 2.825 percent at
the start of the week, with dovish comments from Fed officials
and soft U.S. data further reinforcing views of a slowdown in
the tightening cycle.
(Reporting by Saikat Chatterjee; Editing by Hugh Lawson)
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