The dollar rose to one-month highs versus the euro today as the market kept trimming expectations that next week's expected cut in US interest rates would be an aggressive one around half a point.
Firmer-than-expected economic data have supported bets in recent days on a 25 rather than a 50 basis point cut, lending support to the dollar, along with tentative signs a rally in US equities may have taken hold.
But the rate-cut issue was still far from settled after a Washington Poststory by veteran Federal Reserve reporter Mr John Berry argued a half-point cut was likely, saying it would be a "final step" in getting the US economy moving again.
By 9 a.m. the dollar was off the day's peaks but trading up over half a per cent on the day, having pushed to its best level since May 16th at $1.1586 per euro. This was almost 3.5 cents firmer than its recent record lows versus the single currency revisited at the start of the week.
Behind the dollar's comeback is also an emerging view that the market may have neglected the possibility of the US economy recovering soon.
Today's Washington Poststory may undermine the impact of recent data on arguments for a quarter, rather than half, point rate cut when the Fed meets next week.
Over in the money markets, US interest rate futures were again pricing in a greater chance of a 50 basis point rate cut.