* Upbeat U.S. Q2 GDP partly offset by mixed Fed views
* Dollar still firmer across the board
* Nonfarm payrolls, PMI reports for China & euro zone next
(Adds details, quotes)
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, July 31 The dollar held below a
10-month peak against a basket of major currencies on Thursday
after soaring on upbeat U.S. growth data, with mixed views from
the Federal Reserve tempering the rally.
However, the dollar looked poised to resume rising should
U.S. indicators due by Friday continue to paint a brighter
The dollar index last traded at 81.386 after rising
as far as 81.545 - a high last seen in mid-September. Still, the
index is up more than 2 percent so far this month, on track for
its biggest monthly gain in over a year.
Dollar bulls took heart after the U.S. economy rebounded
sharply in the second quarter, with gross domestic product (GDP)
motoring at a 4.0 percent annualised pace.
The dollar's rally was tempered somewhat after the Fed on
Wednesday reaffirmed it was in no rush to raise interest rates,
even as it upgraded its assessment of the U.S. economy and
expressed some comfort that inflation was moving up toward its
Junichi Ishikawa, market strategist at IG Securities in
Tokyo, said any selling that resulted from the Fed meeting "is
likely to be temporary. It gave a fair view on the economy and
despite expressing concern about the labour market, it took note
of declining unemployment. Most important of all, it made a more
confident assessment on inflation."
"It wasn't a dovish message, but not necessarily a hawkish
one either, although the Fed did leave a psychological impact on
the market with its latest view on the economy and inflation,"
He said he believes the dollar could receive a fresh boost
if U.S. data due later in the day such as jobless claims and the
Chicago PMI prove strong.
The main focus is still on Friday's U.S. non-farm payrolls,
with manufacturing surveys in China and the euro zone also
Another month of healthy U.S. jobs growth will only embolden
dollar bulls, with markets continuing to look for signs of when
the Fed will eventually lift interest rates.
The two-year Treasury yield jumped to its highest
in over three years at 0.59 percent, which in turn helped boost
the allure of the U.S. dollar.
Against the yen, the greenback climbed to a four-month high
of 103.15, before steadying at 102.80. It was poised to
gain about 1.4 percent on the month against the yen.
The euro skidded to a near nine-month trough of $1.3366
but recovered most of its losses to last stand at
$1.3397. The euro was on track to lose 2.1 percent versus the
Not helping the common currency, data showed annual
inflation in Germany slowed to 0.8 percent in July, an outcome
that pointed to another soft reading for EU-wide inflation due
out later in the day.
"We remain constructive on the USD and continue to run long
USD/JPY and short EUR/USD recommendations," analysts at Barclays
wrote in a note to clients.
The dollar also fared well against higher-yielding
currencies such as the Australian dollar, which plumbed a
two-month low of $0.9301 before edging back to $0.9327.
(Editing by Eric Meijer and Richard Borsuk)