TOKYO- The dollar stood near its lowest level in three months against a resurgent euro, struggling for traction as investors pared earlier bets the US Federal Reserve may soon be ready to taper its stimulus.
The dollar index, measuring the greenback against a basket of six currencies, was hovering at 90.027, a tad above a three-month low of 89.646 set on Friday.
Minutes from the Fed’s April policy meeting released last week showed a sizable minority of policymakers wanted to discuss tapering bond purchase.
Still, Fed Chairman Jerome Powell’s repeated warnings that it is not yet time to discuss a reduction in quantitative monetary easing has led many investors to believe it will be months before the central bank actually tweaks policy.
“Inflation figures have been pretty strong but retail sales may be starting to slow down.
And the economic outlook hinges on fiscal policy, which is still uncertain,” said Shinichiro Kadota, senior currency strategist at Barclays.
The White House said on Friday it had pared down its infrastructure bill to $1.7 trillion from $2.25 trillion, with cuts to investments in broadband and roads and bridges, but Republicans dismissed the changes as insufficient for a deal.
Data from US Commodity Futures Trading Commission released late on Friday showed speculators slightly increased their net short dollar positions in the latest week while raising long positions on the euro for four weeks in a row.
The euro traded at $1.2179, off a three-month high of $1.2245 touched on Wednesday.
Some analysts said the currency was capped by comments from European Central Bank President Christine Lagarde on Friday that it is still too early for the bank to discuss winding down its 1.85 trillion euro emergency bond purchase scheme.
Still, the euro and other European currencies have been bolstered by rising optimism about economic reopenings in the region from coronavirus lockdowns.
A preliminary purchasing managers’ index covering the 19-country euro zone’s dominant service industry, published on Friday, bounced to 55.1 from April’s 50.5, well above expectations and its highest since June 2018.
