The dollar edged higher against a currency basket on Thursday, but struggled to make headway as investors continued to grapple with the direction for Federal Reserve policy and fears over the prospect of a global trade war.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, edged up 0.15% to 89.41 by 09:51 AM ET (13:51 GMT), pulling away from the one-month low of 89.06 hit overnight.
The dollar remained on the back foot after the Fed raised interest rates by a quarter point on Wednesday, but stuck to its forecast for two more hikes this year.
Some investors had expected the Fed to project three more rate hikes this year so the decision to stick to its forecast for two additional hikes was seen as less hawkish than expected.
Sentiment on the dollar was also undermined by the threat of a U.S. – led trade war as President Donald Trump prepared to impose up to $60 billion in new tariffs on Chinese imports later in the day. The Trump administration already imposed tariffs on U.S. steel and aluminum imports earlier this month.
Investors are concerned that major U.S. trade partners could retaliate with similar measures and threaten the outlook for global growth.
The dollar was near two-week lows against the safe haven yen, with USD/JPY losing 0.53% to trade at 105.48.
The euro was a touch lower against the U.S. currency, with EUR/USD slipping 0.19% to 1.2315.
The single currency came under pressure after data showing that euro zone private sector activity slowed for a second successive month in March.
Another report showed that German business confidence deteriorated for a second straight month in March amid worries over growing trade friction.
Sterling was also lower against the U.S. currency, with GBP/USD last down 0.18% to 1.4115 amid a bout of profit taking.
The pound initially surged to one-month highs after the Bank of England left rates on hold on Thursday, in a split vote which cemented expectations for a rate hike in the coming months, possibly as soon as May.