The dollar stalled after two days of strong gains on Friday, with nerves around a speech by Federal Reserve chief Janet Yellen due later in the day adding to the handful of factors that have held back a broader rally this year.
The greenback is up around 1 per cent this week, its fourth straight weekly gain on the trot, but a sour January means it is still well below highs hit on the back of optimism about the shape of Donald Trump's presidency in December.
This week's driver has been a swing in market expectations towards a swift rise in Federal Reserve interest rates on March 15.
That is all but fully priced into money markets, compared to a 30 per cent probability a week ago and less than 20 per cent a week before that - yet the dollar is still short of even last month's highs against the euro and yen.
“The developments are clearly supportive for the US dollar, but it has strengthened only modestly so far,” said Derek Halpenny, head of global market research with Japan's MUFG in a report listing nine reasons why the greenback was not rising faster.
“One key factor we believe is the fact that the euro is sitting around key technical support levels between $1.0400 and $1.0500 with a number of key events risks on the immediate horizon.”
Speeches from Fed Chair Janet Yellen and Vice Chair Stanley Fischer on Friday are now widely expected to be the final piece of the puzzle, along with next week's non-farm payrolls. In that time, the market also has next Thursday's European Central Bank meeting to contend with.
Halpenny and others also list nerves ranging from the lack of a substantial rise in longer-term US Treasury yields to worries that Trump will not deliver on promised stimulus and tax reform as holding the dollar back.
The greenback was 0.1 per cent weaker against the basket of currencies used to measure its broader strength in early trade in London.
It dipped to $1.0517 per euro from a high of $1.0495 hit late in the US session on Thursday. It was down 0.1 per cent at 114.27 yen.
Thursday's biggest losers were the Australian and New Zealand dollars.
That points to underlying concern both over what more aggressive rises in US interest rates will do to global demand and the raft of emerging economies which have borrowed heavily in the past few years, as well as to the straight read across of a weaker Chinese yuan against the dollar.
The Aussie was down a quarter per cent on the day at $0.7552, having touched lows of $0.7543, its weakest since January 31. A 1.4 per cent fall for the week is its worst performance since mid-December. The kiwi dollar was also down half a per cent at $0.7026.
After poor Australian trade data on Thursday, some dealers pointed to a 5.5 point fall in the AIG performance of services index to below the 50-point line that divides expansion from contraction.
“The trade data miss was perhaps a bit of a catalyst for a selloff, though setbacks really intensified on the back of ramped up Fed rate hike odds and a concurrent pullback in the US equity market,” analysts from London-based currencies exchange LMAX said in a morning note.
“The Australian dollar had been a clear outperformer in 2017 into this week, but could face more headwinds going forward if the Fed actually follows through.”