(Recasts after European data, updates prices, adds new quote)
* Euro buoyed by strong inflation data, PMIs
* U.S. data also strong
* Friday's U.S. payrolls report eyed
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, Jan 4 The dollar edged down from a
14-year high against a basket of currencies on Wednesday, with
investors cautious about increasing bets on the greenback before
getting fresh clues on the U.S. economy and the timing of
interest rate rises.
The dollar surged to its highest levels since late 2002 on
Tuesday - the first day of trading in 2017 for most financial
centres - after U.S. manufacturing data beat expectations, once
again threatening to reach parity with the euro, which fell to a
14-year low of $1.0340.
But the single currency climbed 0.3 percent on Wednesday to
$1.0435, boosted by data showing euro zone prices rose faster
than expected in December and surveys suggesting business growth
reached its highest in more than five years
That left it almost a cent above the trough hit on Tuesday,
but some way off a three-week peak of $1.07 touched during a
bout of low liquidity last week and over 6 percent lower
compared with two months ago.
"The data coming from Europe is supportive for the euro, but
only at the margins," said MUFG currency economist Lee Hardman,
"Ultimately, the feed-through into the euro is dampened by
the fact that the ECB (European Central Bank) has already
announced an extension of its QE (quantitative easing) programme
into the end of this year. So it's unlikely that the data is
going to be strong enough in the near term to prompt a
The dollar has climbed almost 6 percent since Donald Trump
was elected as U.S. president eight weeks ago, on expectations
that his new administration will introduce reflationary measures
backed by large fiscal spending, prompting the Federal Reserve
to follow through with a series of interest rate hikes.
But with investors already pricing in two to three rate
increases this year, analysts reckon they will want to see more
evidence that growth and inflation are rising and that the pace
of rate hikes will accelerate before putting on more bets on the
HSBC, nevertheless, changed its forecasts late on Tuesday to
show the euro falling to $1.01 in the first quarter, down from
$1.08 previously, though they expect the dollar will then slip
back for the rest of the year, never reaching parity.
The dollar index - which measures the greenback against a
basket of six major rivals - fell 0.3 percent to 102.94,
having hit a peak of 103.82 on Tuesday.
"Yes, we've had some good U.S. data, but we've also had
stronger (European) data," said Rabobank currency strategist
Jane Foley, in London.
"Are investors really prepared to push above those 14-year
highs to make that extra move down to parity? I suspect the
market may need a bit more incentive to do that."
The dollar was seen facing potential turbulence before
Friday's highly anticipated U.S. non-farm payrolls report.
For Reuters new 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
(Additional reporting by Shinichi Saoshiro in Toyko; Editing by