The dollar crawled up against the euro on Thursday but hovered near a record low hit the previous day after the Federal Reserve's expected interest rate cut further eroded the US currency's appeal to foreign investors.
The Fed moderated expectations for further cuts in short-term rates by saying inflation risks were equal to the possibility of slower growth, but analysts said it would take upbeat US economic data to help lift the beleaguered dollar.
"Many investors have not yet completely abandoned views that the Fed will have to cut interest rates again," said Hiroki Shimazu, a market economist at Mizuho Securities.
Investors do not have a clear outlook on US monetary policy at the moment and need fresh clues on how the economy is holding up from US data, including the high-profile employment report on Friday, Shimazu said.
The Fed trimmed rates by 25 basis points to 4.5 percent on top of a half-point slash in September as the central bank tries to counter the effect of housing market problems on the overall economy. But with major economies mostly weathering the US slowdown, some central banks are poised to hold rates steady or in some cases, such as Australia, raise them further as steep commodity prices keep inflation pressures on the boil.
The euro slipped 0.1 percent from US trade to $1.4465 after having vaulted above $1.45 for the first time in its nearly nine-year life to a record high of $1.4508 on trading platform EBS.
But the dollar held firm against the low-yielding yen as the Japanese currency is used as a cheap source of funds to buy higher-yielding currencies in carry trade. The dollar dipped a tad to 115.30 yen but stayed well above a six-week low of 113.25 yen struck last week.
The Fed's post-meeting statement prompted analysts to push back expectations for when another rate cut could come. In a Reuters poll after the decision, most economists at primary bond dealers predicted the Fed would keep rates on hold at its meetings in December and January.
"The statement was hawkish and appeared to suggest the Fed is done with rate cuts," said a senior trader at a Japanese trading firm. "The dollar is getting some support from a rise in US stocks after the rate cut, and if stocks remain firm the US currency may hold off recent lows," he said.
The yen rose against high-yielding currencies as dealers locked in profits a day after the Japanese currency slid sharply. The Australian dollar fell 0.2 percent to 107.33 yen after it hit a 16-year high of 107.84 yen on Wednesday.
The low-yielding yen suffered the previous day as stock markets got a boost from the Fed rate cut and because investors believe the Bank of Japan is likely to wait a while longer before raising rates from 0.5 percent.
A surge in oil prices to record peaks above $96 a barrel has also lifted the currencies of commodity producers like the Canadian dollar. The dollar clawed back some ground to rise 0.1 percent to C$0.9443 after having slid as low as C$0.9419 on Wednesday.
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