Dollar flounders near 1-week low, concerns over policy hamper bounce

Dollar index

The dollar floundered near a one-week low against a handful of currencies after upbeat economic data wasn’t able to successfully lift Treasury yields, with underlying concerns about U.S. trading policy weighing down on the dollar’s attempts to bounce.

The dollar index, which tracks the dollar against a group of major currencies, was flat at 100.470 after it went as low as 100.410 overnight.

The dollar index had risen to a one-month high of 101.760 on Wednesday, as U.S. Federal Reserve Chair Janet Yellen spoke in support of a near-term rate hike and the markets saw strong U.S. inflation and retails sales data.

Indicators that were released on Thursday shed more positive light on the economy of the United States, with the Philadelphia manufacturing index surging to a 33-year high.

But despite these, it was not enough to sustain a rise in Treasury yields which had already climbed to three-week highs mid-week. This caused the dollar to buckle.

"The dollar did rally in spurts this week but the surge lacked strong conviction. For example dollar/yen failed to take out the 115.00 threshold," senior forex strategist at IG Securities in Tokyo Junichi Ishikawa said.

"This shows that the market is still trying to work out the implication of President Trump's policies, of which his approach to trade may not be supportive for the dollar."

After an overnight loss of 0.8 percent, the dollar was 0.1 percent higher at 113.340 yen. It saw a brief two-week peak of 114.955 on Wednesday.

The euro is still stable at $1.0674 after going up 0.7 percent in the previous day.

The Australian dollar gained 0.1 percent to $0.7699.

The New Zealand dollar was steady at $0.7207. The New Zealand dollar looks to end the week changing slightly after slipping to a 3-and-a-half-week low on Tuesday.

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