By John McCrank and Elizabeth Howcroft
NEW YORK (Reuters) – The dollar fell for a third straight day on Thursday as the European Central Bank said it would keep a lid on borrowing costs, while U.S. data eased inflation fears and jobless claims fell to a four-month low, giving a boost to riskier currencies.
The ECB said it was ready to accelerate money-printing to keep eurozone yields down, signaling to skeptical markets it was determined to lay the foundation for a solid economic recovery.
In the United States, soft consumer prices data on Wednesday helped to allay concerns about a possible spike in inflation when economies reopen from the COVID-19 pandemic.
That helped stabilize Treasury yields and lift world equities markets to their highest in over a week.
“The market had probably got itself a little bit too oversensitive about rising runaway inflation – which there isn’t yet,” said Kit Juckes, head of FX strategy at Societe Generale.
The soft inflation data “gives us respite from risk aversion and reverses some of the recent currency moves,” he added.
The Dow Jones Industrial Average hit an all-time high for the fourth straight session on Thursday after a bigger-than-expected fall in weekly jobless claims reinforced expectations of a labor market recovery.
The dollar index was down 0.14% at 91.686 against a basket of currencies, having touched a one-week low earlier in the session. The greenback had hit a three-month high of 92.506 on Tuesday.
The euro was around 0.14% higher against the dollar, at $1.19450. It has fallen 2.1% so far this year.
“The European outlook has disappointed many people and the expectations for the eurozone are still beleaguered by COVID-19, and that’s kind of preventing the euro from really taking off today,” said Edward Moya, senior market analyst at FX broker OANDA
The focus later in the day will be on an auction of 30-year U.S. Treasuries. An auction of 10-year notes on Wednesday drew sufficient demand, helping to allay concerns about investors’ ability to absorb an increase in debt needed to finance the response to the pandemic.
“With the 10yr Treasury auction showing better demand than feared, some calm has been restored in the US bond market,” Mazen Issa, senior FX strategist at TD Securities, wrote in a client note. “We are not out of the woods yet with today’s 30yr auction, but a repeat performance could help secure or signal a renewed tailwind for risky assets.”
Until there is optimism that Treasury yields are not going to skyrocket, the dollar is likely to consolidate around its current levels, at least until next week’s meeting of the U.S. Federal Reserve, said OANDA’s Moya.
Elsewhere, the Australian and New Zealand dollars were up for the third session in a row, both at their highest in a week versus the U.S. dollar, helped by rising commodity prices.
The Japanese yen ticked 0.11% higher versus the dollar at 108.505.
In cryptocurrencies, bitcoin steadied at $56,199.90. The digital currency has recovered some recent losses but not surpassed its all-time high of $58,354.14, which was reached on Feb. 21.
(Reporting by John McCrank in New York and Elizabeth Howcroft in London, Editing by William Maclean, Kirsten Donovan and Jonathan Oatis)
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