Against the yen, the dollar pulled away from early lows and was broadly steady at 107.12 yen. It was still down more than 1% from a high of 108.44 yen hit earlier in the week. Expectations that the US economy would continue to outperform other major economies and put pressure on the US central bank to slow its rate cutting cycle were dampened this week after weak manufacturing surveys.
Investors are now waiting for the ISM services report later in the day and Friday's employment report to confirm or quell recession worries. The dollar has broadly gained in recent weeks as investors added long positions on expectations that other major economies, led by Europe, will underperform the United States.
Latest futures data show long dollar bets at a 3-month high. While interest rate expectations from the US Federal Reserve haven't changed dramatically this week, with money markets expecting policymakers to cut interest rates by 32 bps by the end of the year, traders are buying other currencies.
Marc Chandler, chief market strategist at Bannockburn Global Forex said the euro posted back-to-back gains yesterday for the first time in three weeks and is trying to extend its winning streak to three sessions, which it has been unable to do for two months. Elsewhere, sterling was little moved despite a surprise contraction in the services sector as investors waited to receive a formal European Union response to Britain's latest Brexit offer. The pound drifted 0.1% higher to $1.2315.