* Dollar index dips, still up 1 percent for week
* Yellen speech later eyed for support of March rate hike
* Bulls worry why dollar has not gained more
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, March 3 The dollar stalled after two
days of strong gains on Friday, with nerves around a speech by
Federal Reserve chief Janet Yellen due later in the day adding
to the handful of factors that have held back a broader rally
The greenback is up around 1 percent this week, its fourth
straight weekly gain on the trot, but a sour January means it is
still well below highs hit on the back of optimism about the
shape of Donald Trump's presidency in December.
This week's driver has been a swing in market expectations
towards a swift rise in Federal Reserve interest rates on March
That is all but fully priced in to money markets, compared
to a 30 percent probability a week ago and less than 20 percent
a week before that - yet the dollar is still short of even last
month's highs against the euro and yen.
"The developments are clearly supportive for the US dollar,
but it has strengthened only modestly so far," said Derek
Halpenny, head of global market research with Japan's MUFG in a
report listing nine reasons why the greenback was not rising
"One key factor we believe is the fact that the euro is
sitting around key technical support levels between $1.0400
and $1.0500 with a number of key events risks on the immediate
Speeches from Fed Chair Janet Yellen and Vice Chair Stanley
Fischer on Friday are now widely expected to be the final piece
of the puzzle, along with next week's non-farm payrolls. In that
time, the market also has next Thursday's European Central Bank
meeting to contend with.
Halpenny and others also list nerves ranging from the lack
of a substantial rise in longer-term U.S. Treasury yields to
worries that Trump will not deliver on promised stimulus and tax
reform as holding the dollar back.
The greenback was 0.1 percent weaker against the basket of
currencies used to measure its broader strength in early trade
It dipped to $1.0517 per euro from a high of $1.0495
hit late in the U.S. session on Thursday. It was down
0.1 percent at 114.27 yen.
Thursday's biggest losers were the Australian and New
That points to underlying concern both over what more
aggressive rises in U.S. interest rates will do to global demand
and the raft of emerging economies which have borrowed heavily
in the past few years, as well as to the straight read across of
a weaker Chinese yuan against the dollar.
The Aussie was down a quarter percent on the day at $0.7552
, having touched lows of $0.7543, its weakest since Jan.
31. A 1.4 percent fall for the week is its worst performance
since mid-December. The kiwi dollar was also down half a percent
After poor Australian trade data on Thursday, some dealers
pointed to a 5.5 point fall in the AIG performance of services
index to below the 50-point line that divides expansion from
"The trade data miss was perhaps a bit of a catalyst for a
selloff, though setbacks really intensified on the back of
ramped up Fed rate hike odds and a concurrent pullback in the US
equity market," analysts from London-based currencies exchange
LMAX said in a morning note
"The Australian Dollar had been a clear outperformer in 2017
into this week, but could face more headwinds going forward if
the Fed actually follows through."
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Writing by Patrick Graham)