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Dollar Exhibits Weakness As Rate Cut Looms

The U.S. dollar moved notably higher Thursday morning, but retreated swiftly and stayed weak right through the session, with traders looking ahead to the Federal Reserve's upcoming monetary policy meeting.

The dollar index, which rose to 99.10 early on in the day, dropped to a low of 98.19 before regaining some ground and edging up to 98.37, down 0.27% from previous close.

The euro, which was hovering around $1.1030 before the European Central Bank announced its decision to cut key interest rate and the relaunch of the Asset Purchase Programme, dropped to a low of 1.0928 soon thereafter. However, it regained lost ground and moved on to $1.1088 in the U.S. session.

The European Central Bank announced a package of stimulus measures, including a deposit rate cut and restart of QE program to boost the euro area economy.

The central bank slashed the deposit rate by 10 basis points to -0.5%, while it left the main refinancing rate and the marginal lending rate unchanged at 0% and 0.25%, respectively.

The ECB said it would make monthly asset purchases of EUR 20 billion from November 1.

The new APP will "run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates," the ECB added.

Against the Pound Sterling, the dollar was little changed at 1.2330.

The Japanese yen showed some strength against the dollar after a weak start, but retreated and pared its gains as the session progressed. It was last seen hovering around 108.10 yen a dollar.

In U.S. economic news, first-time claims for unemployment benefits dropped to 204,000, a decrease of 15,000 from the previous week's revised level of 219,000. Economists had expected jobless claims to edge down to 215,000 from the 217,000 originally reported for the previous week.

Another report from the Labor Department said its consumer price index inched up by 0.1% in August after rising by 0.3% in July. The uptick in prices matched economist estimates.

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