The U.S. dollar regained some footing in early Asian trading on Thursday as investors positioned ahead of closely watched interest rate decisions from the European Central Bank (ECB) and the Bank of England (BoE). Both central banks are widely expected to keep rates unchanged later in the day, keeping currency markets in a holding pattern as traders look for guidance on what comes next.
The dollar index, which tracks the greenback against six major currencies, edged up 0.2% to 96.671 after touching a two-week high earlier in the session. The euro held steady at $1.1800 ahead of the ECB’s announcement, with investors expected to focus more on President Christine Lagarde’s post-meeting comments than the decision itself. Analysts at Bank of America said policymakers are likely to stress uncertainty, while maintaining an overall easing bias in the months ahead.
Sterling also traded flat at $1.3650 as markets awaited the Bank of England’s policy decision. Meanwhile, the dollar was little changed against the Japanese yen at 156.92, with traders cautious as Japan’s election campaign enters its final days before Sunday’s vote.
The greenback has drawn support this week as investors digest U.S. corporate earnings and shift toward a more risk-averse stance. U.S. equities have come under pressure, with the Nasdaq Composite sliding nearly 3% over the past two days amid concerns over rising capital spending and sharp selloffs in software stocks adapting to the fast-moving generative AI landscape.
Adding to the cautious mood, Federal Reserve Governor Lisa Cook said she is more worried about stalled progress on inflation than a weakening labor market, reinforcing expectations that interest rates will remain unchanged in the near term. Fed funds futures now show a more than 90% chance the Fed will hold rates at its March meeting, while currency markets also reacted to geopolitical signals, including a modest dip in the dollar against the offshore Chinese yuan following talks between U.S. President Donald Trump and Chinese leader Xi Jinping.
source: cnbc