Dollar struggles to hold on to gains in choppy trade

SYDNEY The dollar fought for a footing in choppy trade on Thursday, with support from upbeat U.S. data and hawkish policymaker comments, while the prospect of higher energy prices helped exporters' currencies and weighed on those of importers.

The dollar was up 1 per cent on the euro and 1.3 per cent on sterling overnight and was trying to hold on to those gains in a bumpy early trade in Asia. The euro has made two unsuccessful attempts to regain parity this week and last bought $0.9916. The pound rebounded from record lows just below $1.15.

The U.S services industry posted another month of expansion in September, data showed overnight, while labor market figures were solid and the trade deficit narrowed. San Francisco Fed President Mary Daly reiterated policymakers' focus on inflation fighting and dismissed market hopes for rate cuts in 2023.

I think that reminded people that you might be a bit premature in trying to price in rate cuts in the U.S., said Westpac currency strategist Imre Speizer.

He said that it pushed up rates and pushed up the U.S. dollar as the Federal Reserve'sFederal Reserve's aggressive moves to rein in inflation set the pace for central banks around the globe.

Speizer said it was a trade for the whole world. There is no way that a currency's interest rates can go off and do their own thing. Bond markets worldwide sold sharply. There are more than 130 basis points of tightening ahead for the Fed before the middle of next year, according to interest rate futures. US GVD EUR The US dollar index dropped 0.06 per cent to 110.86, down lows near 110 earlier in the week, though it was still a bit below last week's 20 year high of 114.78.

The pound went to $0.6518 at the end of last year, while the Australian and New Zealand dollar rose by about 0.4 per cent, taking the Aussie to $0.6518 and the kiwi to $0.5772.

The yen, which has been held steady by the risk of further Japanese intervention, sat at 144.57 per dollar.

Brent crude futures are at a three week high of $93.99 a barrel, according to the Saudi Arabia-led cartel of oil producers.

As a result of the more direct relationship between the finances and the higher energy prices, NatWest Markets strategist Jan Nevruzi said that higher energy prices would have a more direct impact on the European region.

The European Central Bank released minutes from last month's policy meeting later on Thursday. On Friday, traders are waiting for the U.S. labor market data to gauge how fast and far the Fed might be willing to lift interest rates.