CURRENCIES: Dollar's Resurgence Slows

By Victor Reklaitis, MarketWatch Features Dow Jones Newswires

Euro falls after report says ECB is worried about the currency's rally

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The dollar on Thursday pared some of its gains against its major rivals despite fresh economic data that were broadly in line with expectations, including weekly jobless claims, consumer spending and core inflation.

Analysts expected the buck's rally to continue following the data release, after Wednesday's ADP employment report beat expectations and brought positive sentiment into the dollar trade.

But weekly jobless claims for the week ended August 26 (http://www.marketwatch.com/story/jobless-claims-cling-near-postrecession-low-2017-08-31) at 236,000 -- 1,000 higher than expected -- July consumer spending up 0.3% versus 0.4% forecasts, and July core inflation at 0.1% in line with the consensus, seem to have failed to impress traders on Thursday.

The ICE U.S. Dollar Index -- which measures the currency against a half-dozen rivals -- climbed up to 92.342 prior to the data deluge at 8.30 a.m. Eastern, but retreated to 93.0820 after, still up from 92.8860 late Wednesday in New York.

"The greenback continues its recovery from oversold levels, and it's clear that the market is only looking at U.S. data now to boost the case for further short covering," said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note Thursday.

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With one trading day left in August, ICE's dollar gauge is up 0.3% for the month. It remains down for the year, with a loss of about 9%, but it has stabilized as analysts have suggested the buck's 2017 retreat has become overdone (http://www.marketwatch.com/story/why-the-beat-up-dollar-is-poised-for-a-rip-your-face-off-rally-2017-08-04).

At 9:45 a.m. Eastern, investors are slated to get an August reading on business conditions in the Chicago area, then July pending home sales are set to arrive at 10 a.m.

Friday's monthly U.S. jobs report also looks set to be a big catalyst for the buck.

The euro fell to $1.1852, down from $1.1884 late Wednesday. Analysts blamed the slide on a Reuters report (http://uk.reuters.com/article/us-ecb-policy-idUKKCN1BB15J) saying a growing number of European Central Bank policy makers are worried about the shared currency's advance against the dollar, raising the chance the ECB's asset purchases will be phased out only slowly. That report, which cited anonymous sources, appeared to outweigh a higher-than-expected reading on inflation in the eurozone (http://www.marketwatch.com/story/eurozone-inflation-beats-forecasts-2017-08-31-54854654).

The euro still is up a lot for the year, with a gain of 13% against the dollar.

See:August jobs release is crucial test for U.S. dollar (http://www.marketwatch.com/story/august-jobs-data-marks-crucial-test-for-us-dollar-2017-08-30)

The British pound dipped to $1.2879 against the greenback, compared with Wednesday's $1.2925 level. As the third round of Brexit negotiations between the Kingdom and the European Union is set to conclude, chief E.U. negotiator Michel Barnier commented that no decisive progress had been made.

Elsewhere, the dollar rose to Yen110.41 against the Japanese yen , up from Yen110.24 late Wednesday.

(END) Dow Jones Newswires

August 31, 2017 09:58 ET (13:58 GMT)