FX round-up: Dollar softness in focus as traders eye US rate-rise prospects

Sterling turned in a ho-hum performance on key crosses Thursday, with dollar weakness the focus of traders pondering the outlook for near-term US rates rises and tending to gold safety amid lower global equities markets.

At 17:23 GMT, sterling was flat at $1.2461, having spent much of the session making ground on the US unit. It was down 0.52% to €1.1694. The dollar-spot index fell 0.6% to $100.570.

The British currency gained against those of Australia, New Zealand and South Africa, but fell versus those of Canada and Japan.

The dollar faded against the euro, loonie and yen, but rose on the aussie, kiwi and rand.

FXTM vice president of market research Jameel Ahmad noted the variety of upbeat comments from different US Federal Reserve officials in recent days.

He also noted the dollar-spot index appeared "at risk to dropping back below the psychological 100 level". On Thursday, this coincided with a rise in gold, up 0.65% to $1241.1 an ounce, as equity markets in the US and across Europe slipped lower.

"Perhaps investors are concerned that the Trump administration will turn their attention back towards barking at the strength of their currency," said Ahmad in a statement. Investors are also keeping an eye out for Trump's much-anticipated tax reforms.

"The weakness in the dollar is providing the platform for strength across the majority of its major trading partners with the Euro, Japanese Yen, British Pound and Swiss Franc among others strengthening against the Greenback during trading today."

Michael Hewson, chief market analyst at CMC Markets UK, noted the dollar's struggle on Thursday, and also the rebounds in defensive currencies such as the yen and Swiss franc.

"Why this US dollar weakness is happening now is difficult to pinpoint," said Hewson, but noted US Federal Reserve vice chair Stanley Fischer's comments to Bloomberg earlier on Thursday.

Fischer voiced confidence on the US economic outlook and the expected path for future interest rate hikes, but shied from providing precise guidance.

"While these comments were broadly in line with (Fed chair) Janet Yellen's they still don't chime with the prospect of a (rate) move in March, and that may well be behind today's US dollar weakness," said Hewson.

Jasper Lawler, senior market analyst at London Capital Group, said the odds of a US rate rise had improved to about 50/50 since Yellen's testimony to Congress earlier this week.

In the US, data showed that US housing starts fell in January, while other numbers revealed manufacturing conditions in the Philadelphia region unexpectedly improved in February.

Finally, US initial jobless claims were up a less-than-expected 5000 to 239,00 last week, from the previous week's unrevised level. Analysts had expected claims to jump to 245,000.