Dollar drops as investors remain edgy before US inflation data

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Reuters

LONDON (Reuters) – The dollar hit a 15-month low against the yen and fell versus the euro for the fourth consecutive day yesterday with investors nervous ahead of key US inflation numbers due later amid a fragile recovery in equity markets.

The dollar, measured against a basket of currencies, has now given up two-thirds of the gains it notched up this month when investors rushed into the greenback as equity markets suffered a violent sell-off.

The euro traded 0.2 percent higher at $1.2370, off the lows of $1.2206 hit on Friday. The dollar index was down 0.1 percent.

Strong German economic numbers for the fourth quarter of 2017 underlined the strength of the euro zone economy.

“People looking for a big bounce in the dollar from the volatility spike must be feeling pretty depressed right now,” said Kit Juckes, chief FX strategist at Societe Generale in London, referring to the dollar’s losses in recent sessions.

He said that even if US inflation numbers come in better than expected they would not lead to a sustained dollar recovery but a short-term gain for the greenback.

“The dollar bulls have a weak hand right now, given where we are after the shake-out. The trouble with inflation numbers up now and further Fed hiking is that it just means a sugar rush before the end of the cycle and an earlier recession,” he said.

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