Dollar dips ahead of PMI data releases from major economies

Source: Market Screener

SINGAPORE, Feb 22 (Reuters) - The dollar edged broadly lower on Thursday as traders awaited a slew of business activity surveys to gauge the health of major economies and what that may mean for the global interest rate outlook.

Flash Purchasing Managers' Index (PMI) figures across the U.S., the UK and the euro zone are due later in the day and will provide further clarity on their respective manufacturing and service sectors.

Ahead of the releases, the euro gained 0.14% to $1.0835, while sterling rose 0.08% to $1.2647.

Against the yen, the dollar edged 0.04% lower to 150.23.

"A glance at the composite PMIs for the U.S., Europe and the UK show that they're either expanding at a faster pace or slowing at a diminishing rate," said Matt Simpson, senior market analyst at City Index.

"That warns of upside pressure for growth and inflation - which ties back into the 'higher-for-longer' narrative that traders don't want to hear."

The dollar index slipped 0.15% to 103.81. It has fallen over 0.4% for the week thus far, with its latest blip lower owing to a global decline in bond yields earlier this week.

Still, the index is up more than 2% for the year, as traders pare back aggressive bets for a slew of rate cuts by the Federal Reserve this year, which has in turn kept the greenback supported.

Minutes of the Fed's latest policy meeting released on Wednesday reinforced the message that the central bank is in no hurry to ease rates that officials still expect will begin to be lowered sometime this year.

"There wasn't too much there, they reiterated what we knew from the FOMC meeting," said Tony Sycamore, a market analyst at IG.

"I don't think the market's quite as convinced about where we're going to start to see the Fed cut rates. We know that the core PCE (personal consumption expenditures) next week will be stronger, so that pushes back expectations again of rate cuts in the U.S."

Traders are currently pricing in just about a 30% chance that the Fed could begin easing rates in May, much lower than an over 80% chance a month ago, according to the CME FedWatch Tool.

That has followed recent data which showed U.S. producer prices and consumer prices rising more than expected in January, alongside persistent strength in the country's labour market.

Elsewhere, the Australian dollar rose 0.07% to $0.65565, while the New Zealand dollar hit an over one-month high of $0.6205.

The Reserve Bank of New Zealand (RBNZ) meets next week, and while economists generally expect the bank to hold the cash rate at 5.5%, some see a risk of a hike, which has given some support to the kiwi.

(Reporting by Rae Wee; Editing by Edwina Gibbs and Christian Schmollinger)