Dollar holds early gains ahead of ECB rate decision

London

THE dollar drifted higher against a basket of its rivals on Thursday, moving away from a two-week low in the previous session, as investors moved to the sidelines before a trio of central bank policy decisions.

Major currencies were hovering in tiny ranges with only the Japanese yen leading losers against the greenback as overnight headlines that Washington was seeking a new round of trade talks with Beijing doing little to dispel the broader undertone of caution in markets.

The dollar rose 0.2 per cent to 94.93, rising from a end-August low of 94.73 hit in the previous session.

The euro and the pound held steady ahead of policy decisions by the European Central Bank due shortly.

"The eurozone economy is doing fine and inflation is printing at or around target - but the immediate concern for us is that Italy continues to make headlines, as does Brexit, and trade," said Dean Turner, economist at UBS Wealth Management.

The ECB is all but certain to keep policy unaltered on Thursday, making only nuanced changes to its guidance to stay on course to end bond purchases this year and raise interest rates next autumn.

The Bank of England held its fire after raising interest rates last month with market expectations of another rate hike only seen in the second half of next year.

Turkey's central bank raised its benchmark rate by 625 basis points on Thursday in a move that boosted the lira and may ease investor concern about President Recep Tayyip Erdogan's influence on monetary policy.

Turkey's lira rallied more than two per cent at 6.1775 per dollar. It had slumped to a record low of 7.2400 in mid-August, raising investor expectations for the central bank to tighten monetary policy and arrest the currency's slide.

The Norwegian crown was the only major currency holding its own against the dollar, consolidating a chunky 1.5 per cent rise so far this week as expectations rose of a bank rate hike next week after strong inflation data. REUTERS