Illustration photo of a U.S. Dollar note
LONDON - 3 August 2017: The dollar recouped some losses on Thursday but was still holding near a 2-1/2-year low hit in the previous session as investors readied for U.S. jobs data.
Most of the U.S. currency's gains came against the commodity linked currencies such as the Australian dollar AUD=D3 and its Canadian counterpart CAD=D3, a theme that has been consistent this week, as investors took profits after recent gains.
For example, Brown Brothers Harriman strategists noted that the U.S. dollar rose to a 20-day moving average against its Canadian rival on Thursday, a level it hasn't traded above since early June.
On a broader trade-weighted basis, however, the dollar index .DXY, which measures its value against a basket of six major currencies, rose about 0.2 percent to 93.02. On Wednesday, it slid to 92.548, its weakest since May 2016.
"Despite today's bounce and the heavy positions the dollar can go lower, with any signs of improvement in the euro zone economy likely to push euro/dollar above the 1.20 line," Michael Hewson, chief market analyst at CMC Markets.
Despite double-digit U.S. earnings growth in the second quarter and private sector payroll growth last month of another 178,000, expectations of a third Federal Reserve interest rate rise have dissipated. Futures markets now only see a 35 percent chance of another hike by the end of 2017.
The dollar's decline has pushed the euro higher EUR=EBS with the single currency hitting a 2-1/2-year high of 1.1910 against the dollar on Wednesday. It was trading a shade below that at $1.1842 on Thursday.
Despite the single currency's more than 12.5 percent rise against the dollar this year, a Reuters poll found risks still skewed more in favor of the single currency, driven by expectations the European Central Bank will start to scale back its stimulus program.
The poll of more than 60 foreign exchange strategists showed the euro will weaken slightly in the coming year but is expected to close 2017 higher than where it started.
Sterling GBP=D3 slumped 0.6 percent to the day's lows at $1.3145 after the Bank of England kept interest rates at a record low once again on Thursday and trimmed its forecasts for economic growth both this year and next.