The dollar was steady against its major peers on Thursday, as new data showed a still-tight U.S. labor market, underpinning convictions that the Federal Reserve's monetary policy tightening may be far from over.
The number of Americans filing new claims for unemployment benefits unexpectedly fell in the week ended Feb. 18, decreasing 3,000 to a seasonally-adjusted 192,000, according to the Labor Department.
The dollar index, which tracks the greenback against six major peers, dipped slightly 0.01% to 104.58, slipping below the 104.68 high seen in late morning trading in Europe but little changed since yesterday's session.
The index climbed 0.36% on Wednesday as minutes from the Fed's Jan. 31-Feb. 1 meeting showed nearly all policymakers favored a slowing in the pace of interest rate hikes, but also indicated that curbing unacceptably high inflation would be the "key factor" in how much further the U.S. central bank's benchmark overnight interest rate would need to rise. That rate is currently in the 4.50%-4.75% range, having risen rapidly from the near-zero level in March 2022.
"Previously, most people assumed a cycle peak of around 5.25%. It's pricing in a little bit more than that now. The idea that the Fed has a bit more work to do still has been kind of reaffirmed this morning by the upward revision to the PCE data that came out with the Q4 GDP numbers. So, that's likely to keep the dollar generally more supportive on the session here," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
The fourth-quarter Personal Consumption Expenditures (PCE) price index, one of the key inflation measures tracked by the Fed for monetary policy, rose 3.7%, from the first reading of 3.2%, while the core PCE climbed to 4.3%, from the initial estimate of 3.9%.
Traders of futures tied to the Fed's policy rate largely stuck to the view that the central bank will keep raising rates by a quarter of a percentage point at its next three policy meetings. They are still pricing the federal funds rate to reach 5.36% in July, and remain above 5% for the year.
"Finally we're starting to see an agreement where the market is anticipating where the Fed will take rates. It's going to be two or three rate hikes. No one is really saying they're going to hold now," said Edward Moya, senior market analyst at OANDA in New York. "The labor market remains tight. Everyone is just waiting for some type of sign that it's going to loosen, and right now it appears that the economy is very resilient."
The euro fell 0.03% to $1.0598. It briefly touched $1.0586 in early trading, its lowest level since early January, largely unaffected by euro zone inflation data that came in a touch higher last month than previously estimated. That data confirmed that price growth is now well past its peak.
Elsewhere, sterling was slightly lower at $1.2019, and the yen was last trading at 134.69 per dollar.
Incoming Bank of Japan Governor Kazuo Ueda will speak in the country's parliament on Friday and Monday, with investors looking for clues on how soon the BOJ could end its bond yield control policy.