CURRENCIES: Dollar Weakens After 3-day Rise Ahead Of U.S. Inflation Report

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

The dollar skipped lower against most other major currencies on Thursday, as traders waited for the closely watched U.S. inflation report that could steer expectations for the next Federal Reserve rate hike.

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The ICE Dollar Index , which measures the greenback against a basket of six rival currencies, lost 0.2% to 92.349, setting it on track to break a three-day winning streak.

The euro bought $1.1899, up from $1.1885 late Wednesday in New York.

The dollar index is still up 1.1% for the week, but has lost almost 10% this year so far.

"The weakness of the dollar throughout 2017 has been on the disappointment of Trump's failure to achieve tax reform or fiscal stimulus, but also the concerns over subdued U.S. inflation," said Richard Perry, market analyst at Hantec Markets, in a note.

"The expectation for a Fed hike in December have been seriously questionable, however, if these two key factors of tax reform and U.S. inflation that have driven dollar weakness can be turned around, then the dollar may be able to drive a sustainable recovery," he added.

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The August inflation report is slated for release at 8:30 a.m. Eastern Time and forecast to show consumer prices rose 0.3% month-on-month. Inflation stood at 0.1% in July. The Fed has been concerned with the weak readings recently, raising doubts that the central bank will hike rates again this year. However, if inflation starts to pick up again in coming months, expectations for a December rate increase are likely to be rekindled.

The Bank of England was also in focus on Thursday ahead of its monetary policy decision at noon London time, or 7 a.m. Eastern. The U.K. central bank is widely expected to keep rates on hold, although the August rise in inflation to 2.9% has spurred speculation more members could vote for a tightening.

Two out of the nine members on the Monetary Policy Committee are seen as voting for a rate rise.

"If three or more members opt for higher rates to divert the inflation from the 3% level, the pound could rally significantly. In this scenario, the next important technical level stands at $1.3420," said Ipek Ozkardeskaya, senior market analyst at London Capital Group, in a note.

Sterling fetched $1.3204, down from $1.3210 on Wednesday, ahead of the decision.

In other central bank news, the Swiss National Bank kept interest rates on hold. However, the SNB said it's ready to intervene in the currency market (http://www.marketwatch.com/story/snb-holds-rates-still-ready-to-intervene-on-franc-2017-09-14) if necessary to weaken the Swiss franc, which it sees as overvalued. The franc fell to $1.0343, down from $1.0372 late Wednesday in New York.

The yen rose, sending the dollar to Yen110.42 compared with Yen110.49 late Wednesday in New York.

(END) Dow Jones Newswires

September 14, 2017 06:23 ET (10:23 GMT)