Forex - Dollar Edges Lower But Remains Supported in Subdued Trade

The dollar edged lower against the other major currencies in subdued trade on Thursday, but it remained supported at one-week highs by the release of strong U.S. data and by news of a potential rate hike this year by the Federal Reserve.

The U.S. Department of Labor reported on Thursday that initial jobless claims unexpectedly declined last week to hit 259,000.

A separate report showed that manufacturing activity in the Philadelphia area increased unexpectedly in September.

As expected, the Fed left interest rates unchanged at the conclusion of its two-day policy meeting on Wednesday.

However, the central bank indicated that one more interest rate hike is likely this year, even though it reduced its outlook for inflation this year from 1.7% to 1.5%, and from 2% to 1.9% in 2018.

The Fed also said it will begin to unwind its $4.5 trillion balance sheet in October. Most assets consist of the Treasurys and mortgage-backed securities the bank acquired under its quantitative easing program.

EUR/USD was up 0.24% at 1.1922, while GBP/USD added 0.16% to 1.3515 after the UK Office for National Statistics reported that public sector net borrowing increased by £5.09 billion last month, compared to expectations for an increase of £6.50 billion.

Elsewhere, the yen remained lower, with USD/JPY up 0.08% at 112.31, its highest since July 18, while USD/CHF rose 0.27% to trade at 0.9724.

Earlier Thursday, the Bank of Japan also left its monetary policy unchanged, in line with market expectations. However, a dovish new board member was said to have opposed the decision.

The Australian and New Zealand dollars remained sharply lower, with AUD/USD down 1.33% at 0.7924 and with NZD/USD dropping 0.60% to 0.7314.

Meanwhile, USD/CAD edged up 0.14% totrade at 1.2340, its highest since September 6, even as Statistics Canada said wholesale sales increased 1.5% in July, compared to expectations for a 0.9% decline.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.10% at 92.13 by 10:45 a.m. ET (14:45 GMT), still at its highest level since September 14.