FOREX-Dollar rally pauses, but stays solid on U.S. economy, Fed outlook
By Daniel Leussink
TOKYO, Oct 10 (Reuters) – The dollar slipped further from seven-week highs on Wednesday although underlying support for the greenback remained strong amid a confluence of factors, including a strong U.S. economy and a steady path for rate hikes by the Federal Reserve.
While U.S. Treasury yields came off their highs overnight, the propensity for further spikes remained intact as investors bet rising inflation pressures will keep the Fed firmly focused on tighter policy, even as U.S. President Donald Trump took aim at policy makers’ hawkish inclinations.
Sterling took some comfort on hopes Britain and the European Union might be close to a Brexit deal, while markets’ focus also was squarely on a slate of issues, including the intensifying Sino-U.S. trade dispute and Italy’s budget plans.
On Wednesday, the dollar index was largely unchanged at 95.575, not far off 96.163 reached during the previous session – its highest level since Aug. 20.
“There seems to be a bit of exhaustion on the part of the foreign exchange market,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
“We’re not seeing the extension of the dollar buying (against the euro and yen),” he said.
Sterling got a lift from a Dow Jones Newswires report the previous day that an agreement on the terms for Britain to leave the economic bloc may be reached as soon as Monday.
Dow Jones, citing unidentified diplomats, said Britain and the EU had narrowed their differences around the Irish border but some issues have not been resolved.
Sterling gained 0.1 percent to a near two-week