Dollar rally sputters as euro rises after German data

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The U.S. dollar dipped against a basket of currencies on Thursday as upbeat German inflation data prompted some traders to buy the euro and data showing the U.S. economy slowed more than earlier estimated in the first quarter weighed on the greenback.

U.S. gross domestic product grew at a 2.0 percent annual rate in the January-March period, instead of 2.2 percent pace it reported last month, amid the weakest consumer spending in nearly five years.

The dollar index, which measures the greenback against a basket of six currencies, was down 0.11 percent at 95.16, after advancing about 1 percent over the last two sessions amid continuing trade tensions between the United States and its major trading partners.

"It's a bit of a mixed bag, the currency seems to be pretty much flat," Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California, said, referring to the dollar's performance against its peers.

While the greenback's recent rally, which vaulted the dollar index to a near one-year high overnight, may have paused, its longer-term trend was still bullish, said Trang.

"The conversation as we end out June is really to the fact that the Fed raised rates this month and the expectation is that they want to do two more hikes for the second half of the year," he said.

The euro edged higher against the dollar as data showed German inflation surpassed the target set by the European Central Bank for the euro zone in June.

European Union leaders meet in Brussels for two days of talks on migration that German Chancellor Angela Merkel described as "make or break" for the union.

Overall, currencies remained rangebound on Thursday as mixed signals on the trade dispute between Washington and its trading partners kept sentiment subdued. The dollar was little changed against the Japanese at 110.40 yen.

Trade-related worries sent the yuan to a fresh seven-month low against the dollar.

Sterling was down 0.19 percent against the dollar. Earlier, the British currency rose off eight-month lows against the dollar to trade flat after the Bank of England's chief economist Andy Haldane said his vote to raise interest rates should not be considered surprising after a decade of ultra-loose monetary policy.

The Canadian dollar strengthened against the greenback, supported by a recent increase in oil prices and as investors added to bets for a Bank of Canada interest rate hike next month.