Dollar Pares Gains as Momentum Slows Near Mid-February Highs

(Bloomberg) -- The dollar halved its gains for the day after upside momentum faltered near mid-February highs, leaving traders to ponder the next move as focus shifted to speeches Friday by Federal Reserve Chair Janet Yellen and Vice Chair Stanley Fischer.

The greenback was higher versus a majority of its G-10 peers, though gains were uneven. The advance was paced by the interest rate-sensitive dollar-yen, which rose as much as 2 percent from Tuesday's low. Dollar gains were muted against the euro, while the greenback actually lost ground versus the Australian dollar, which was boosted by strong economic data. The Bloomberg dollar index was up 0.3 percent, paring a gain of as much as 1 percent from its Tuesday low that was spurred by two Fed officials signaling that a rate hike would be under consideration at the central bank's March meeting. Momentum slowed Wednesday as the 10-year Treasury yield stalled at 2.4688 percent.

• Trader attention is now turning to Yellen and Fischer for their views on rate-hike expectations that have risen steadily in recent days amid a torrent of hawkish remarks from voting and non-voting members of the FOMC
• Along with Treasury yields, the better USD tone was also supported by a surge in global equities that saw stocks in the U.S. rise to records after President Trump's address to a joint session of Congress was deemed more moderate than previous rhetoric
• USD/JPY rose as high as 114.05 in its biggest gain since Feb. 9; USD gains slowed in European and U.S. trading after a busier session in Asian hours shortly after the Fed officials spoke
• USD/JPY could rise less quickly in the near-term if option-related offers emerge around 115.00 and 115.50, where large strikes roll off in coming days, a trader in London said, though stronger gains may be seen longer-term, Bloomberg strategist Vassilis Karamanis writes
• EUR/USD trading down ~0.25% at 1.0550 after hitting a fresh weekly low at 1.0514 early in the U.S. session as option-related bids ahead of 1.0500 and profit-taking cushioned a drop that began Tuesday
• EUR may find technical support from the Feb. 22 low at 1.0494, though stop-loss sell orders below there may see euro losses accelerate on a break, traders in Europe said
• USD gains came as data showed real personal spending fell 0.3% vs est. for a drop of 0.1% and as the PCE deflator rose to 1.9% y/y vs est. for 2%

To contact the reporter on this story: Dennis Pettit in New York at dpettit5@bloomberg.net.

To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Greg Chang, Mark Tannenbaum