By Jemima Kelly
LONDON (Reuters) - The dollar inched up but stayed close to six-week lows against a basket of currencies on Wednesday, kept under pressure by the view that the U.S. Federal Reserve will raise interest rates later rather than sooner.
The greenback had been on its best run of weekly gains in 1-1/2 years until last week, when expectations that the Fed would clearly signal a near-term rate hike were disappointed, and U.S. growth data came in much weaker than expected.
The dollar index inched up 0.2 percent on Wednesday but at 95.284 (DXY) remained close to Tuesday's low of 95.003 and was down 2 percent compared with a week ago, before the Fed's policy statement.
In London, UBS Wealth Management currency strategist Geoffrey Yu said the dollar had been boosted by a risk-off mood in U.S. trading on Tuesday, when indexes suffered their worst day in a month on lower oil prices and lackluster inflation data. But he said any gains on risk-aversion would be capped.
"We're caught in this kind of trap where every time we get nervous about something, the dollar rallies, but then the next thing to think about is: is the Fed going to react to that by pushing out their rate views?" Yu said. "And then you can't afford to be long dollars that aggressively any more. So that's why we have these turns, quite rapidly."
The dollar was up 0.2 percent at 101.08 yen
Junichi Ishikawa, currency analyst at IG Securities in Tokyo, said it was a matter of time before the dollar breaks below 100 yen. The dollar briefly slipped below the watershed level in the stormy markets that followed Britain's vote to leave the European Union in June, but it has managed to stay above ever since.
"The break below 100 yen after Brexit was an irregular move. But this time, the yen is gaining steadily on fundamental factors like Japan's improving current account balance and the fading impact of BOJ's multi-dimensional easing," Ishikawa said.
The Japanese central bank eased monetary policy on Friday by upping the amount of its exchange-traded fund purchases, but underwhelmed the markets by holding off from increasing the amount of government bonds its buys every month.
Bitcoin was down around 10 percent compared with 12 hours previously at $543
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