(Changes headline and first paragraph to remove incorrect
reference to 11th daily gain)
* Dollar retreats from one-month high
* Dollar slips from a 2-1/2-week high vs yen
* Euro recovers from a five-week low
* U.S. housing starts, Philly Fed Business Index in focus
By Yumna Mohamed
LONDON, Feb 16 The dollar headed for a second
day of losses on Thursday, falling 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 on Wednesday and a retreat by U.S. treasury
yields from recent highs as possible drivers of the dollar fall,
while markets weigh the likelihood of an early rate increase.
A rise in January inflation numbers on Wednesday and
testimony from U.S. Federal Reserve chief Janet Yellen that it
would be unwise to let the U.S. economy "run too hot",
heightened expectations U.S. interest rates will rise within
Societe Generale's Kit Juckes said he thought the Fed was
moving too slowly to spur any change in market expectations on
rates that would give a broader boost to the dollar.
"You would get a more explosive dollar move if you got a
more explosive move in rate expectations," he said.
"It's a case of boiling frogs. The Fed is slow-moving and I
don't know that we can keep on at this pace. Like the Fed, the
dollar is two steps forward, one step back and today is a step
The dollar index was down 0.4 percent, falling to
100.81 from a peak of 101.76 hit on Wednesday after the
better-than-expected U.S. inflation numbers and retail sales
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 increases were on
the way, because 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
Vice Chair Stanley Fischer also gave a relatively moderate
message on Thursday, saying policy remained accommodative and he
expected a gradual rise in rates.
The dollar surged in the month after Trump's election on
Nov. 8 on expectations he would deliver tax reforms and increase
infrastructure spending, reflating the U.S. economy and spurring
the Fed to more dramatic action.
But it has struggled since, at least in part because of
concern 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 the next 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 on
Wednesday against the yen, touching a low of 113.73. It was last
down over half a percent at 113.50 yen.
The euro edged up almost 0.4 percent at $1.0638, 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 Larry King)