Forex – Dollar Lower as Bounce From Fed Short-Lived

© Reuters. Dollar lower as bounce from Fed short-lived – The dollar reversed early gains against a currency basket on Thursday as comments from the Federal Reserve about inflation rising this year failed to lift the greenback from its almost three year lows.

The , which measures the greenback’s strength against a basket of six major currencies, was down 0.12% at 88.83 by 09:53 AM ET (14:53 GMT), clinging above last week’s low of 88.25, its weakest level since December 2014.

After briefly climbing in early trade the dollar fell back as investors awaited Friday’s U.S. employment report for January.

The dollar has weakened broadly this year as expectations for a faster rate of monetary tightening outside the U.S., which would lessen the divergence between the Federal Reserve and other central banks, eroded its relative yield attraction for investors.

The on Wednesday but said inflation is likely to accelerate this year, underlining expectations that interest rates will continue to rise.

The Fed has forecast three rate hikes for this year after lifting borrowing costs three times in 2017.

Data on Thursday showed that the unexpectedly fell last week, pointing to sustained strength in the labor market.

Another report showed that U.S. worker productivity slid lower in the fourth quarter.

The euro moved higher against the dollar, with rising 0.29% to trade at 1.2449, not far from the more than three year peaks of 1.2537 reached last week.

In the euro zone, data on Thursday showed that in January. The euro zone manufacturing index came in at 59.6, down slightly from December’s record high of 60.6.

The data underlined expectations that the European Central Bank will soon start to scale back its massive stimulus program.

The dollar held gains against the yen, with adding on 0.25% to trade at 109.45, having pulled up from last Friday’s four-and-a-half month low of 108.27.

Sterling was little changed, with at 1.4200.

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