CURRENCIES: Dollar Rises From 13-month Low

By Carla Mozee and Anora Mahmudova, MarketWatch Features Dow Jones Newswires

Aussie soars to highest since 2015

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The U.S. dollar rose on Thursday, gaining against major rivals in what analysts suggested was a mild consolidation following a sharp slide over recent weeks.

The ICE U.S. Dollar Index , which tracks the greenback against a half-dozen other major rivals, rose 0.2% to 93.91, bouncing off the 13-month low it touched on Wednesday, according to FactSet data.

The dollar turned broadly lower during Wednesday's session as the Fed, led by Chairwoman Janet Yellen, was seen as striking a cautious note on inflation.

Inflation was "running below 2%", the Federal Open Market Committee said (http://www.marketwatch.com/story/fed-to-wind-down-bond-holdings-relatively-soon-2017-07-26), tweaking language from June's statement in which it said inflation was "running somewhat below 2%."

"The dollar is back to where it was before the Fed announcement on Wednesday, so, I don't think investors changed their minds about the policy--that the balance sheet reduction will start sometime in September or October and the Fed won't raise rates until December," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

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"Today's particular action is likely a function of positioning, however. The dollar gains is not significant yet," Chandler said.

The euro bought $1.1676 on Thursday, after settling at $1.1735, the highest since Jan. 14, 2015. The euro strengthened 11% so far this year.

The pound was at $1.3076, down from $1.3122 on Wednesday, the strongest New York close since September. Since the start of the year, the pound gained nearly 6% against the buck.

Boris Schlossberg, managing director of G-10 currency strategy at BK Asset Management questioned if the dollar's drive lower was overdone.

"The fact of the matter is that U.S. monetary policy remains on a tightening path as the Fed tries to move towards normalization. Only a marked decline in economic activity would force Ms. Yellen and company to change their course," he said, "and unless the [July jobs data] next Friday produce a massive downside surprise such a scenario is unlikely to take hold."

The dollar extended its gain against Switzerland's currency , fetching 0.96 francs compared with 0.9506 late Wednesday.

Some analysts view the recent divergence between the Swiss franc and the euro--traditionally correlated currencies--as a temporary blip.

"We do not think the franc's losses against the dollar is a convincing sign that the euro is about to turn lower. We suspect the franc's weakness is a reflection of euro strength that is being seen against several other major currencies," said Marc Chandler in a note.

The dollar reversed earlier gains against the yen , buying Yen111.07 versus Yen111.18.

Some analysts expect the dollar to start to recover if GDP numbers, due on Friday surprise on the upside.

"With the dollar adjusting to expectations of slower future U.S. rate rises, if we now see some improvement in U.S. data then the dollar could start to head higher again, especially against her weaker rivals such as the Japanese yen or Swiss franc," said Fawad Razaqzada, market analyst at Forex.com.

A couple of economic releases Thursday morning went largely unnoticed. Initial jobless claims (http://www.marketwatch.com/story/us-jobless-claims-climb-10000-to-244000-2017-07-27) in the period running from July 16 to July 22 increased by 10,000 to a seasonally adjusted 244,000, but still remain near the lowest level in decades.

Separately, durable-goods orders (http://www.marketwatch.com/story/boeing-bonanza-durable-goods-orders-soar-65-in-june-2017-07-27)leapt 6.5% last month, a three-year high, but it was entirely thanks to Boeing's summer of orders.

In other moves Thursday, the Australian dollar surged above 80 U.S. cents for the first time since May 2015 as the U.S. unit declined and after data showed industrial profits in China accelerated in May (http://www.marketwatch.com/story/china-industrial-profits-accelerate-in-may-2017-06-27). China is Australia's largest trading partner.

The Aussie changed hands at $0.7973 in late New York trade Thursday, down from $0.8004 late Wednesday.

(END) Dow Jones Newswires

July 27, 2017 14:42 ET (18:42 GMT)