The dollar held steady versus a basket of major currencies on Wednesday, nursing losses suffered the previous day in its biggest one-day fall so far this month. The dollar index traded at 97.304 .DXY as of 0530 GMT (1.30 a.m. EDT), having fallen back from a three-month high of 98.151 set on Tuesday, when it ended up falling about 0.7 percent. In part the dollar was a victim of its own success, having climbed for most of the past four weeks to provide bulls with tempting profits. "There was no obvious catalyst for the dollar pullback but USD losses coincided with a retreat in equity markets and lower U.S. front-end yields," analysts at BNP Paribas wrote in a note to clients. Yet fundamentals favor the currency given the Federal Reserve remains on track to hike interest rates later this year. "We expect to see good interest to buy the U.S. currency on this pullback and we remain generally bullish," say BNP. U.S. stocks fell on Tuesday as results from IBM (IBM.N) and United Technologies (UTX.N) dampened optimism for the earnings season. The blow to stocks made bonds look more attractive in comparison and nudged Treasury yields lower, in turn weighing on the greenback. The dollar eased 0.2 percent to 123.67 yen JPY=, slipping further away from Tuesday's high of 124.48 yen set on Tuesday, the greenback's highest level in about six weeks. On Tuesday, comments from Bank of Japan Governor Haruhiko Kuroda had helped weigh on the dollar versus the yen. Kuroda said he expected inflation to accelerate considerably in the coming months due to a tight labor market and brushed off the idea of needing more quantitative easing. Kuroda's comments suggest that the BOJ has little desire to add to its monetary stimulus, said Masafumi Yamamoto, senior strategist for retail financial service provider Monex, Inc. in Tokyo. "It reinforces the view that fresh yen-selling factors are unlikely to emerge from Japan," Yamamoto said. Although the dollar could gain if the market starts to fully price in the possibility of the U.S. Federal Reserve raising interest rates twice by year-end, the greenback may struggle to rise to levels above 125.00 yen in the next month or two, he added. The euro inched up 0.1 percent to $1.0940 EUR=, having pulled up from a three-month low of $1.0808 set on Monday. The Australian dollar held steady at $0.7416, staying above a six-year low of $0.7328 set on Monday. Australia's benign inflation figures on Wednesday reinforced belief that the Reserve Bank of Australia (RBA) has room to lower interest rates further if needed. RBA Governor Glenn Stevens said, however, that too much easing could lead to longer-term dangers through risk-taking and excessive borrowing, in effect setting the bar pretty high for any rate cuts.
