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US dollar edges up on euro woes, capped by White House drama

[NEW YORK] The US dollar rose on Thursday, boosted by weakness in the euro after the European Central Bank's July policy meeting minutes, but the US currency was volatile as rumours swirled about the possible resignation of Gary Cohn, director of the US National Economic Council.

Following rumours of Mr Cohn's departure, the White House released a statement saying he "intends to remain in his position". That helped calm markets as Mr Cohn, along with Treasury Secretary Steve Mnuchin, is seen as pivotal to US President Donald Trump's economic agenda of tax cuts and infrastructure spending.

Still, analysts said, the US dollar was in an unenviable position, with inflammatory news headlines from the White House weighing on its already weak position.

"We had yesterday's Fed minutes that certainly didn't do the dollar any favours," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

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The US dollar fell on Wednesday after the release of minutes from the Federal Reserve's July policy meeting that showed policymakers growing more worried about weak US inflation.

"We have to look at it in that context, where the dollar's already on a somewhat shaky footing," Mr Esiner said.

The currency whipsawed for most of the day as news about Mr Cohn and an attack in Barcelona that left at least 13 dead sent traders to safe-haven currencies like the Japanese yen and Swiss franc.

The US dollar fell 0.55 per cent against the yen to 109.60 yen and 0.4 per cent against the Swiss franc. It hit session lows against both in the aftermath of the Barcelona attack.

The US dollar index edged up to 93.628.

The index's largest component is the euro, which sank to a three-week low after the ECB's minutes showed officials warning about a possible market overshoot for the currency. The euro has risen close to 12 per cent against the US dollar this year.

The minutes, released at 7:30am EDT (1130 GMT), spurred an almost one per cent fall in the single currency against the US dollar, along with losses against the Swiss franc, yen and sterling.

The euro was last down 0.25 per cent against the US dollar at US$1.1736.

Analysts said the snapback in the euro may have also been due to the market over-reacting to the ECB minutes and thin trading volume.

"Given the market rumours, given the anxiety, given the market positioning, this seems to be a reasonable price action," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.