Dollar above lows as euro struggles

Greenback capped by concerns over recent volatility

The dollar hovered above its recent lows against major rivals on Thursday, benefiting from the euro’s weakness and higher US yields but capped by concerns about recent equity market volatility.

Against a basket of six major rival currencies, the dollar was steady on the day at 90.242, not far from Wednesday’s session high of 90.40, its highest in two weeks.

The euro edged up 0.1 percent to $1.2278 but remained not far from its overnight low of $1.2246 and a far cry from last month’s 3-year high of $1.2538.

“The euro had recently been too strong, with too many expectations about early policy normalization of the European Central Bank, and investors are now unwinding those positions,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

“The dollar/yen seems to be capped by uncertainty in the equity markets, which will likely keep it in a range,” Yamamoto said. “But maybe the equity market downturn won’t last for long, because the world economy is solid.”

The dollar was slightly higher on the day against its Japanese counterpart at 109.37 yen.

Higher US yields also underpinned the greenback.

On Wednesday, US Treasury yields rose, so generally speaking, that has led to dollar strength, said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank.

San Francisco Federal Reserve Bank President John Williams sought to assuage some of those fears on Wednesday.

He said at an event in Honolulu that the US central bank will stick to its plan for “steady, gradual” interest rate increases even though recent US economic data has been stronger than some have expected and the labor market has tightened.