SYDNEY (Reuters) - The dollar nursed modest losses against a basket of major currencies early on Wednesday, having fallen in particular against sterling which raced to a five-month high on the back of upbeat UK data.
Traders said the market was also taking a more defensive stance on the greenback in case U.S. retail sales due later in the day were to disappoint. ECONUS
The dollar index .DXY last traded at 94.561, having shed 0.5 percent on Tuesday. The greenback dipped to 119.87 yen JPY=, from Tuesday's high of 120.28. Still, it remained stuck in a 118.500-120.845 range seen since April.
The euro climbed to $1.1216 EUR= from $1.1134, but was well short of retesting a two-month peak of $1.1392 set last week.
Sterling was one of the best performing major currencies overnight, rallying as far as $1.5710 GBP=D4, a high last seen in mid-December, before settling at $1.5668 early in Asia.
Official data showed British industrial output grew at its fastest rate in six months in March after an unexpected bounce in oil and gas extraction, easing fears that economic growth is starting to slow.
In contrast, U.S. retail sales are expected to rise a mere 0.2 percent in April, slowing from a 0.9 percent jump in March, though sales ex-autos should be better. ECONUS
“With the Fed so intensely focused on the data at present, these matter,” said Emma Lawson, senior currency strategist at NAB.
“Another solid outcome is a necessary, but not sufficient, condition to keep the 2015 hike talk alive.”
San Francisco Fed President John Williams, addressing economists in New York on Tuesday, would not commit to a preferred time frame for hiking rates but stressed that policy changes would be data dependent.
There is a host of other event risks due later in the day including China’s industrial production and retail sales data and the Bank of England’s quarterly inflation report. ECONCN
This means the major currencies are likely to settle into a tight range in the lead up to these reports, traders said.
Investors will also be keeping a wary eye on the bond market, after a global rout unexpectedly halted overnight, as well as Greece’s ongoing battle to secure fresh funding.
Editing by Eric Meijer