Dollar holds ground as macro data hints at later Fed rate cut
By Kevin Buckland
TOKYO (Reuters) — The dollar held its ground early on Thursday after a volatile two days that saw sharp declines followed by a rebound as traders took incoming economic data as signalling the Federal Reserve will wait longer before cutting interest rates.
The risk-sensitive Australian and New Zealand dollars sank amid a decline in regional equities.
The U.S. currency was little changed at $1.08425 per euro and slipped 0.15% to 151.15 yen after mounting a recovery on Wednesday from its steepest declines against major peers in a year.
The dollar index — which measures the greenback against the euro, yen and four other rivals — added 0.11% to 104.43. It gained 0.31% on Wednesday, following a 1.51% plunge the previous day.
The dollar drew support from better-than-expected retail sales numbers combined with more signs of a cooling of inflation, feeding into the narrative for an economic 'soft landing', which would allow the Fed more time before cutting rates.
Traders trimmed the odds for a first reduction by March to less than 1-in-4 from better than 1-in-3 a day earlier, according to the CME Group's (NASDAQ:CME) FedWatch Tool.
«While inflation is falling, the economy remains robust, which might even allow the Fed to increase rates if they chose,» although there doesn't seem to be appetite for a hike among Fed officials currently, said James Kniveton, senior corporate FX dealer at Convera.
Elsewhere, the Aussie slid 0.29% to $0.64905, and the New Zealand dollar declined 0.5% to $0.5993.
Australia's currency failed to draw support from a strong rebound in employment, as traders keyed on the fact that gains were mostly in part-time labour, while the jobless rate actually ticked higher.
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