Dollar steadies

The dollar steadied on Wednesday after rallying on US consumer confidence and home sales data that slightly boosted expectations the Federal Reserve will bump up interest rates again next month.
The dollar had gained for a second straight day on Tuesday after the Conference Board's index of consumer sentiment rose in July, against forecasts for a slight drop, and US sales of existing homes dipped in June by less than economists expected.
"The movement last night showed the sentiment of the market," said the chief trader at a European investment bank in Tokyo. "The market is favouring another hike from the Fed." Federal fund futures showed the market was pricing in a nearly 60 percent chance the Fed will push overnight rates up another quarter percentage point to 5.5 percent at its next policy meeting on August 8.
The central bank has boosted rates at 17 straight meetings, helping to widen the dollar's yield advantage over the euro and yen. "The main focus is still the interest rate differentials, and on what will happen in August," said Kikuko Takeda, currency strategist at Bank of Tokyo-Mitsubishi UFJ, adding that currencies would likely stay rangebound until the Fed's next move.
Given the euro zone's solid economic growth and with inflation running above the European Central Bank's 2.0 percent target ceiling, the ECB is widely expected to raise rates next week to 3.00 percent from 2.75 percent.
For further confirmation of a buoyant euro zone economy the market was awaiting Germany's Ifo business climate index. It is expected to show a slip to 106.0 in July after a surprise jump to a 15-year high of 106.8 last month. The euro was little changed at $1.2580 after falling half a percent on Tuesday.
The dollar inched down to 117.05 yen after rising half a percent in the previous session.
The single European currency dipped to 147.25 yen from 147.45 yen in late US trade. The Australian dollar held near the day's high of $0.7562, hit after data showing a surprising jump in consumer prices in the second quarter fed expectations that the Reserve Bank of Australia would raise rates from 5.75 percent next week.