US Dollar off lows after upbeat data, still down on the week

Frankfurt (June 20)  The dollar stayed under pressure early on Friday, but managed to reverse some of its losses in a quieter session overnight after upbeat U.S. data helped temper the fallout from the Federal Reserve's surprisingly dovish policy outlook.

Data offering more evidence the U.S. economy was recovering from a disastrous first quarter helped lift the dollar index to 80.317 .DXY from a one-month trough of 80.147. Still, it was down 0.3 percent on the week, its biggest decline in two months.

Investors had sold the greenback after the Fed on Wednesday sounded comfortable about the outlook for inflation despite recent signs of a pick-up in price pressure.

That dashed some expectations the Fed might have to start lifting interest rates earlier than expected and initially helped push U.S. Treasury yields down.

But data on Thursday showed new claims for jobless benefits fell last week and factory activity in the mid-Atlantic region accelerated in June, prompting Treasury yields to reverse higher.

"The rates market appeared to have second thoughts about Wednesday's post-FOMC reaction, with yields reversing some of their decline and helping the USD stabilize as well," analysts at BNP Paribas wrote in a note to clients.

"We think the bias remains to the upside for U.S. yields from current levels, with the passage of time likely to force greater pricing of rate hike risk absent renewed deterioration in the data."

Against the yen, the dollar climbed back towards 102.00 yen JPY= from Thursday's low of 101.74, while the euro eased back to $1.3610 EUR= from a two-week high of $1.3644.

Source: Reuters