The euro bounced 0.5% from an 18-month trough to $1.1216 as the dollar slipped from an 18-month peak. A sharp drop in Treasury yields weighed on the greenback, while cautious remarks from Fed officials tempered October hike expectations despite hot US inflation data.
The euro bounced 0.5% from an 18-month trough to $1.1216 on Thursday, putting it on track for its biggest daily gain in nearly two months. The move came as the dollar eased from its own 18-month high.
Dollar index slips as yields drop
The dollar index was last down 0.2% on the day at 102.03, after it hit an 18-month high on Wednesday when US inflation figures came in stronger than expected.
A rally in US government bonds pushed the benchmark 10-year yield to 5.085% and the 30-year yield to 5.428%, both at around three-week lows. Worries about AI companies' heavy debt burdens had revived, driving safe-haven flows into Treasuries.
Sterling strengthened 0.5% to $1.3253 after data showed that Britain's economy unexpectedly grew 0.1% in August.
Fed officials temper October bets
Market pricing for an October Fed rate hike rose sharply to 50% after the CPI data. Then Vice Chair for Supervision Michelle Bowman and San Francisco Fed President Mary Daly, among other officials, said the central bank could wait for a clearer picture ahead of the October 27 and 28 meeting.
Khoon Goh, head of Asia research at ANZ, said markets seem to have taken the view that the CPI reading was not hot enough to force the Fed's hand for October. He added that the meeting falls just a few days before the midterm elections, which possibly explains why the market does not want to price in more aggressively.
Kit Juckes, chief FX strategist at Societe Generale, described a tug of war between those looking for a dollar correction and those watching economic data. He suspects trading will be choppy until the retail sales and PPI numbers are out.
Investors will next watch remarks from Fed officials, including Chair Kevin Warsh, at the IMF-World Bank annual meetings in Bangkok on Friday.
Source: Investing.com (Reuters)
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