Investing.com – The U.S. dollar held steady near a two-week high in early European trading on Thursday, supported by rising yields and growing belief that the Federal Reserve won’t cut rates anytime soon.
At 04:35 ET (08:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell marginally to 104.940, after earlier hitting its highest since May 14 at 105.17, after an increase of 0.5%. in the previous session.
There is demand for a safe haven dollar
A wave of stronger-than-expected economic data, hawkish comments from some Fed officials and a series of poorly received auctions have caused bond yields to rise sharply, sparking a rush to the safest assets and boosting the dollar got.
Conviction is growing that the Fed will not cut rates anytime soon, and traders are awaiting confirmation from Friday’s data, the Fed’s favorite inflation gauge, that inflation remained stable through April.
Ahead of that, a revised first-quarter reading will be released later on Thursday, which is expected to show continued resilience in the US economy. The strong economy gives the Fed more room to keep interest rates high for longer.
“A series of softer US Treasury auctions and a sell-off at the longer end of the bond market are weighing on risky assets and providing some support to the dollar,” ING analysts said in a note.
“This could well be a temporary change ahead of Friday’s key US data, but it’s a trend worth keeping an eye on.”
The euro bounces off a two-week low
In Europe, it traded 0.1% higher at 1.0810, rebounding from a two-week low, ahead of the Eurozone business confidence data release later in the session and then the CPI release for the eurozone at the end of the week.
“A modest improvement is expected across the board, but as we saw with Monday’s German IFO release, the recovery in sentiment appears to be modest rather than euphoric,” ING analysts said.
The country is widely expected to announce a rate cut next week, but uncertainty about what comes next could be influenced by Friday’s inflation figures.
fell 0.1% to 1.2697 after sterling fell to a two-month low in the previous session.
The yen rises ahead of Tokyo’s inflation report
In Asia, the price traded 0.4% lower to 157.03, but the pair remained close to recent highs amid continued yen weakness.
The focus was now entirely on next Friday, for more signals about the Japanese economy. Any sign of rising inflation could mean some relief for the yen.
traded 0.1% lower at 7.2461, amid growing pressure from concerns about a sluggish Chinese economy.
data from China will be released on Friday.
