By Ankur Banerjee
SINGAPORE (Reuters) -The dollar was broadly steady near a six-week high on Thursday, as investors await GDP and other data this week for clues as to where U.S. rates might be headed, while the euro was soft before a European Central Bank policy meeting later in the day.
The dollar index, which measures the U.S. currency against six rivals, gained 0.06% to 103.35, not far from a six-week high of 103.82 touched on Tuesday. Traders have been consolidating positions ahead of the Federal Reserve's policy meeting next week.
The first reading of fourth-quarter U.S. gross domestic product is likely to show 2% annualised growth, according to a Reuters poll, though estimates ranged from 0.8% to 2.8%.
Even at the top end of the range, it would be a marked slowing from 4.9% in the July-September quarter.
The report is, however, likely to show that the U.S. avoided a recession in 2023 and is expected to show moderating inflation in the last quarter, stoking expectations of rate cuts sometime in the first half of 2024.
"The US dollar has been beholden to the markets' perception of the Fed rate path, a dynamic I don't see changing in the near term," said Kieran Williams, head of Asia FX at InTouch Capital Markets.
The dollar index is up about 2% this month as traders drastically scale back bets on early and deep rate cuts from the Fed following pushback from central bankers and a slew of data that underscored the resiliency of the U.S. economy.
Markets are currently pricing in a 43% chance of a cut in March, the CME FedWatch tool shows, down from 88% a month ago. Traders are also pricing in 134 basis points of cuts this year compared to 160 bps at the end of 2023.
Other U.S. data this week includes the Fed's favourite gauge of inflation - the personal consumption expenditure (PCE) data - on Friday.
Next week, the Fed is widely expected to stand pat but comments from Chair Jerome Powell will be intensely scrutinized to assess if the U.S. central bank is ready to start cutting interest rates.
The euro was a tad weaker, last buying $1.0877 ahead of the ECB policy meeting, where the central bank is expected to keep rates steady and the focus is on how strongly officials are likely to push back against expectations of steep rate cuts.
Markets are pricing in 130 bps of cuts from the ECB this year.
The ECB ended its quickest rate hiking cycle in September but has been adamant that even discussing a reversal would be premature since price pressures have yet to be fully extinguished and crucial wage talks remain ongoing.
In Asia, the yuan held steady after China's central bank on Wednesday announced a deep cut to bank reserves, a move that will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy.
Offshore yuan rose 0.09% to $7.1670 per dollar. Spot yuan opened at 7.1607 per dollar and was last changing hands at 7.1620. [CNY/]
The move from the central bank comes after a Bloomberg report earlier this week of a rescue package worth $278 billion to help stabilise the battered stock markets.
The Australian dollar and the New Zealand dollar struggled to sustain a China-inspired rally earlier this week. Aussie last bought $0.6575, while kiwi was at $0.61085. [AUD/]
The yen weakened 0.18% to 147.77 per dollar, giving back some of its gains from Wednesday as traders took note of the Bank of Japan's hawkish tilt.
Bank of Japan chief Kazuo Ueda said on Tuesday the prospects of achieving the central bank's inflation target were gradually increasing, adding to expectations that the country might soon leave behind its ultra-loose monetary policy.