Dollar holds below two-month highs as Fed policy in focus

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NEW YORK — The dollar was steady on

Thursday as investors evaluated the likelihood that the U.S.

Federal Reserve will be more aggressive in stamping out high

inflation if it persists, while the pound weakened after the

Bank of England made no changes to its monetary policy.

Fed policymakers have been offering differing viewpoints on

how long inflation is likely to stay high and when it will be

appropriate to tighten monetary policy after the Fed last week

surprised markets by forecasting two rate hikes in 2023.

The dollar index was little changed on the day

against a basket of currencies at 91.790, holding below a

two-month high of 92.408 reached on Friday after the Fed

meeting.

“I do suspect we’ll have a little bit more consolidation and

then some more dollar upside,” said Erik Nelson, a macro

strategist at Wells Fargo in New York.

“The Fed put the market on notice with regards to its

inflation target and new mandate, and really just the idea that

they would be completely and resolutely dovish forever … so I

think there’s more room for a shakeout here,” Nelson said.

On Thursday, two Fed officials warned that inflation could

rise more than policymakers expect in the near term.

Other U.S. central bank policymakers said employment needs

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much more improvement after job losses during the pandemic.

Data showed fewer Americans filed new claims for

unemployment benefits last week.

New orders for key U.S.-made capital goods unexpectedly fell

in May, likely held back by shortages of some products.

The next major U.S. economic focus will be producer price

data on Friday.

U.S. President Joe Biden on Thursday embraced a bipartisan

Senate deal to spend hundreds of billions of dollars on building

roads, bridges and highways.

Sterling slipped after the Bank of England said inflation

would surpass 3% as Britain’s locked-down economy reopens, but

the climb further above its 2% target would only be “temporary”

and most policymakers favored keeping stimulus full throttle.

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“While the underlying tone was quite upbeat, and we do think

that there was a clearer hawkish lean, it was not hawkish enough

for those looking for a sharper turn after last week’s FOMC

meeting,” analysts at TD Securities said in a report on

Thursday.

The British pound fell 0.26% to $1.3929.

The euro gained 0.03% on the day to $1.1932.

German business morale rose more than expected in June and hit

its highest level since November 2018, a survey showed.

The greenback gained to 111.11 Japanese yen

overnight, the strongest since March 2020, before dropping back

to 110.86, down 0.09% on the day. Data showed Japan’s corporate

services prices rose in May at the fastest annual pace in eight

months.

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Currency bid prices at 3:00PM (1900 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 91.7900 91.7990 +0.01% 2.010% +91.9050 +91.6580

Euro/Dollar $1.1932 $1.1927 +0.03% -2.35% +$1.1956 +$1.1918

Dollar/Yen 110.8550 110.9750 -0.09% +7.34% +111.1100 +110.7050

Euro/Yen 132.26 132.32 -0.05% +4.21% +132.5700 +132.1200

Dollar/Swiss 0.9183 0.9181 +0.02% +3.80% +0.9200 +0.9175

Sterling/Dollar $1.3929 $1.3966 -0.26% +1.96% +$1.3986 +$1.3889

Dollar/Canadian 1.2322 1.2307 +0.13% -3.23% +1.2341 +1.2283

Aussie/Dollar $0.7582 $0.7577 +0.07% -1.44% +$0.7591 +$0.7566

Euro/Swiss 1.0956 1.0950 +0.05% +1.38% +1.0976 +1.0952

Euro/Sterling 0.8563 0.8542 +0.25% -4.18% +0.8591 +0.8534

NZ $0.7062 $0.7047 +0.21% -1.66% +$0.7073 +$0.7043

Dollar/Dollar

Dollar/Norway 8.5000 8.5420 -0.49% -1.01% +8.5440 +8.4940

Euro/Norway 10.1420 10.1745 -0.32% -3.11% +10.1903 +10.1347

Dollar/Sweden 8.4650 8.4771 -0.13% +3.28% +8.5061 +8.4533

Euro/Sweden 10.1013 10.1149 -0.13% +0.25% +10.1279 +10.1009

(Reporting by Karen Brettell; additional reporting by Elizabeth

Howcroft in London; Editing by Angus MacSwan and David Gregorio)