The dollar steadied today after a key regional US manufacturing survey deflated recovery hopes and rekindled expectations of an aggressive US interest rate cut next week.
The dollar stood at $1.1690 per euro, up slightly from the New York close but down more than a cent from one-month highs scaled early yesterday.
After strong gains earlier in the week, the US currency turned tail in yesterday's New York session after a manufacturing index from the Philadelphia Federal Reserve failed to back optimism generated by another regional manufacturing survey on Monday.
The Federal Reserve Bank of Philadelphia said its index of factory business conditions rose to 4.0 in June from -4.8 in May.
Some in the market had expected a sharper rebound, however, after a strong Empire State survey, a gauge of New York manufacturing conditions, on Monday.
The Fed meets to discuss interest rates on June 24-25th and is widely expected to cut rates. The big question is by how much.
With little fresh guidance from Fed policymakers themselves, investors have paid an unusually large amount of attention to newspaper commentaries.
Yesterday, a Washington Postarticle argued a 50 basis point cut from the Fed was more likely, but a Wall Street Journalarticle today quoted unnamed Fed officials saying a quarter-point cut could not be ruled out.