The dollar edged up against a basket of major currencies on Thursday, coming off its lowest in almost a year and pausing from sharp falls earlier in the week. Investors booked gains in the Australian and New Zealand dollars, driving them down from this week's one-year highs while the dollar failed to gain much traction after benchmark world stocks hit an 11-month high in early trade.
Sterling rose after the Bank of England left monetary policy unchanged as expected, countering speculation of further easing. The pound hit a near three-week high at $1.6600, while it touched the day's high versus the euro at 87.58 pence.
The US currency has suffered as investors bet on economic recovery through commodity-linked and higher-yielding currencies. But European stocks turned south after a strong opening and many in the market feel the risk rally is starting to look stretched, giving the dollar hope of a rebound. "We'll still be looking for some further gains from some of the major pro-cyclical and commodity currencies but there are some risks now starting to develop which suggest that these moves are likely to start running out of steam," said Ian Stannard, senior currency strategist at BNP Paribas.
The dollar index, which tracks its performance against a basket of six major currencies, was 0.1 percent up from late US trade at 77.192. The index plumbed 76.803 in intraday trade on Wednesday, its lowest level in almost a year. The euro fell 0.2 percent at $1.4520, after touching the year's high above $1.4600 on Wednesday.
Against the yen, the dollar was up 0.1 percent at 92.15 yen, after hitting a seven-month low of 91.61 yen on trading platform EBS on Wednesday. The New Zealand dollar eased 0.4 percent to $0.6940, falling from just below Wednesday's one-year high above $0.7000 after the Reserve Bank of New Zealand (RBNZ) governor said it was overvalued and on weaker-than-expected Australian jobs data.
Earlier the RBNZ left rates on hold at a record low of 2.5 percent as expected but indicated it was less inclined to cut rates again. The Australian dollar fell after data showed Australia's employment dropped by 27,100 jobs in August, more than double a Reuters forecast of 12,500, although the jobless rate held steady at 5.8 percent, better than the 5.9 percent forecast. The Aussie dropped 0.8 percent to $0.8552, retreating from Wednesday's one-year high of $0.8669.