* Euro rebounds from 5-week lows versus dollar
* Dollar scales back from 2-1/2-week peak against yen
* Upbeat U.S. data briefly trims dollar index's drop
* Futures imply traders pare view on U.S. rate hike in March
(Updates market action, adds quote)
By Richard Leong
NEW YORK, Feb 16 The dollar weakened against a
basket of major currencies on Thursday, posting its steepest
one-day drop in over two weeks, due to lower U.S. bond yields
and uncertainty over the timing of the Federal Reserve's next
interest rate increase.
The greenback posted losses for a second day, retreating
further from a one-month high set during a winning streak where
it touched a five-week peak versus the euro and a 2-1/2 week
high against the yen.
Traders have scaled back bets on a looming U.S. rate hike as
they concluded Fed Chair Janet Yellen did not deliver enough
conviction at her economic testimony before Congress on
Wednesday on whether the Fed's next rate increase will come at
its March 14-15 meeting.
However, she signaled more than two rate increases may be
possible this year as the economy approaches full employment and
inflation closes in on the Fed's 2 percent goal.
"The dollar rally that preceded Yellen's testimony wasn't
given more fuel so we are seeing that move fade," said Richard
Scalone, co-head of foreign exchange at TJM Brokerage in
Investors now await for details from U.S. President Donald
Trump on possible proposals on tax cuts, looser regulations and
infrastructure spending, traders said.
"With the spotlight on Trump's policy agenda, the Fed has
taken a backseat as their response has become more sensitive to
the president's fiscal initiatives," said Peter Ng, senior
currency trader at Silicon Valley Bank in Santa Clara,
The dollar index was last down 0.7 percent at 100.49,
below a one-month peak of 101.76 reached on Wednesday.
The greenback scaled back from a 2-1/2 week high of 114.95
yen on Wednesday against the yen, touching a low of
113.17 yen. It was last down 0.9 percent at 113.15 yen.
The euro gained 0.7 percent at $1.0669, recovering from a
five-week trough of $1.052 set on Wednesday.
Earlier Thursday, the greenback briefly pared its losses
against the euro and yen following encouraging data led by a
Philadelphia Fed measure on U.S. Mid-Atlantic business activity
which hit a 33-year high in February.
Reduced expectations about a rate increase in March,
together with declines on U.S. equity indexes, helped revive
investors' appetite for U.S. Treasuries, pushing benchmark
yields below 2.50 percent.
Interest rates futures implied traders saw a 22 percent
chance of a rate increase in March, down from 31 percent
on Wednesday, according to CME Group's FedWatch program.
Currency bid prices at 2:30PM (1930 GMT)
Description Last U.S. Close Pct Change
Euro/Dollar $1.0667 $1.0598 +0.65%
Dollar/Yen 113.2100 114.1500 -0.82%
Euro/Yen 120.76 120.98 -0.18%
Dollar/Swiss 0.9979 1.0051 -0.72%
Sterling/Dollar 1.2486 1.2458 +0.22%
Dollar/Canadian 1.3060 1.3077 -0.13%
Australian/Doll 0.7692 0.7708 -0.21%
Euro/Swiss 1.0645 1.0654 -0.08%
Euro/Sterling 0.8540 0.8502 +0.45%
NZ 0.7231 0.7221 +0.14%
Dollar/Norway 8.2844 8.3375 -0.64%
Euro/Norway 8.8361 8.8370 -0.01%
Dollar/Sweden 8.8565 8.9182 -0.07%
Euro/Sweden 9.4482 9.4548 -0.07%
(Additional reporting by Yumna Mohamed; Editing by Bernadette
Baum and Lisa Shumaker)