* Dollar retreats from one-month high
* Dollar slips from a 2-1/2-week high vs yen
* Euro recovers from a 5-week low
* U.S. housing starts, Philly Fed Business Index in focus
By Yumna Mohamed
LONDON, Feb 16 The dollar broke an 11-day
winning streak on Thursday, falling back against the euro, yen
and the basket of currencies that measures its broader strength
after hitting its highest in a month a day earlier.
Analysts pointed to a mixture of unexpected drops in U.S.
industrial output and home builder sentiment on Wednesday and a
retreat of U.S. treasury yields from recent highs as possible
drivers of the dollar fall.
That all ran counter to signals from U.S. Federal Reserve
chief Janet Yellen, and a strong rise in January inflation
numbers, which spoke for a rise in U.S. interest rates within
"Because the market is very reluctant to price more Fed
tightening for this year and next, nominal yields are not rising
as fast as inflation expectations are and therefore U.S. real
yields have not moved in the dollar's favour in spite of the
better data," BNP Paribas strategist Sam Lynton-Brown said.
The dollar index was down 0.4 percent in early
European trade, falling to 100.81 from a peak of 101.76 on
Wednesday after the better-than-expected U.S. inflation numbers
and retail sales data.
Traders price in a 31 percent chance of a rate increase at
the Fed's March meeting, up from 13 percent on Monday, according
to the CME Group's FedWatch Tool.
Yellen hinted on Tuesday that more rate hikes were on the
way as the jobs market has improved and inflation has shown
signs of nearing the Fed's two percent goal.
Meanwhile, New York Fed President William Dudley on
Wednesday reinforced the central bank's cautious optimism that
President Donald Trump and the Republican-controlled Congress
would not derail plans for gradual rate hikes in the months and
Expectations Trump would deliver tax reforms and rises in
infrastructure spending that would reflate the U.S. economy and
spur the Fed to more action were at the heart of a surge for the
dollar in the month after his election on Nov. 8.
But the dollar has struggled since, due at least in part to
concerns over Trump's protectionist views and signs he may
favour a weaker currency.
"We don't have much choice but to wait and see what details
on trade, tax and fiscal policy the new government will provide
and to then try and evaluate the possible consequences and the
Fed's reaction," Commerzbank analysts said in a note.
Markets will get another chance to check the U.S. economic
pulse from another batch of data, including housing starts,
building permits and the Business Outlook Survey by Reserve Bank
The dollar came off a 2-1/2-week high of 114.95
marked on Wednesday against the yen, touching a low of 113.73.
It was last down almost half a percent at 113.66 yen.
The euro edged up over 0.3 percent at $1.0632, recovering
from a five-week trough of $1.052 touched on Wednesday.
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
(Editing by Jeremy Gaunt)