Dollar oscillates as market digests US inflation data, ECB

NEW YORK: The dollar index was down slightly on Thursday in a choppy session in which it alternated between losses and gains as investors digested elevated US inflation data and commentary from the European Central Bank.

After adopting a wait-and-see attitude all week, sucking volatility from the market and leaving major currencies mostly range-bound Thursday's news appeared to add little new direction to currency markets.

The European Central Bank raised its growth and inflation views but promised to keep ample stimulus flowing, fearing that a retreat now would accelerate a worrisome rise in borrowing costs and choke off recovery.

And across the pond, data showed that the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months, while consumer prices increased further in May as the pandemic's easing grip on the economy continued to boost domestic demand.

The dollar index, which measures the greenback against a basket of major currencies, has fluctuated narrowly around the psychologically important 90 level, and was last down 0.08% at 90.058 The euro was last up 0.02% at $1.218.

"You have this tug between the two currencies and it's creating a back and forth. That's why you're seeing a little bit of a cap in terms of dollar weakness and euro strength," said Minh Trang, Senior FX Trader at Silicon Valley Bank.

"The overall trend has been a bit of dollar weakness not just because of the robust growth in the US there's been robust growth over all. A lot of economies have been recovering," he said. "When you have optimism in overall global growth typically that creates a risk on mentality that's going to favor other currencies over the dollar."

The Australian dollar was up 0.25% at $0.7749 while the new Zealand dollar was up 0.33% at $0.7199.

The yen traded at 109.5850 per dollar, also down slightly from Wednesday.

Deutsche Bank's Currency Volatility Index, was at its lowest level since February 2020.

Investors were closely watching for US consumer prices for any signs that higher prices could last longer than expected, potentially calling into question the Federal Reserve's insistence that current inflation pressures are transitory and monetary stimulus should stay in place for some time yet.

"People are digesting what the next move may be. The data today didn't give enough lift to commit to one side or the other," said Trang.

Traders sent longer-term US Treasury yields higher after Thursday's inflation data steepening a closely watched part of the yield curve.

In crypto markets, bitcoin held gains from its biggest rally since February on Wednesday, when it jumped nearly 12%.

It last traded slightly higher at $37,464, after rebounding from a three-week low of $31,025 hit on Tuesday when signs of institutional investor caution and regulatory attention drove selling.

The best-known crypto currency has struggled since reaching a record $64,895.22 in mid-April.