Dollar trims post-Fed gains

The dollar stepped back from this week's 2-1/2 month high against an index of currencies on Thursday, paring gains made after the publication on Wednesday of minutes from the Federal Reserve's latest policy meeting dampened expectations for an interest rate cut.
Traders and analysts said there was a feeling that the dollar's post-Fed minutes rally had been overdone, and investors were now positioning themselves ahead of the Beige Book report on regional economic conditions and US trade data later on Thursday.
The US trade figures for August are due at 1230 GMT. Economists expect them to show the deficit shrank to $66.7 billion from $68.0 billion in July. An above-consensus outcome could boost the greenback.
"There may be just a little bit of a presumption that the numbers today won't be particularly worrisome for the dollar. Retail sales and confidence data due tomorrow may also be reasonably supportive," Rabobank strategist Jeremy Stretch said. Wednesday's release of the minutes to the Fed's September meeting were hawkish, with policymakers remaining "quite concerned" about inflation risks and renewing their commitment to control inflation pressures.
"With money markets pricing out...expectations for Fed easing there's no room at this point to start expecting higher rates," Tullett Prebon G7 economist Lena Komileva said.
Some analysts say the US economy still looks set to slow down and an interest rate cut was likely later next year. By 1156 GMT the euro was up 0.1 percent on the day at $1.2528, having fallen to a 2-1/2 month low of $1.2500 on Wednesday. Analysts said a strong reading of the trade data could see an attempt to break support at $1.2460.
But support could prove tough to crack as speeches from several European Central Bank policymakers could accelerate expectations for eurozone rate hikes. The dollar was down 0.1 percent at 119.60, having hit a 10-month high of 119.83 on Wednesday.
The euro was steady at 149.88 yen, nearly one yen off a record high set in August.
The Australian dollar was the biggest gainer, rising 0.9 percent at US $0.7491 following domestic jobs data that easily beat forecasts and boosted expectations the Australian central bank could raise interest rates again later this year.
The dollar drew support from comments by Richmond Fed President Jeffrey Lacker, who said on Wednesday that the central bank has to be "quite vigilant" to ensure inflation does not stay elevated.