By Karen Brettell

NEW YORK (Reuters) – The dollar rebounded on Thursday but held below 20-year highs reached last week, a day after the Federal Reserve affirmed that it would take aggressive steps to combat soaring inflation but played down the prospect of even larger rate hikes.

The greenback dropped sharply on Wednesday after Fed Chair Jerome Powell told reporters that policymakers were not actively considering 75-basis-point moves in the future. It came after the U.S. central bank hiked rates by 50 basis points, as was widely expected.

But it regained ground on Thursday with the euro dented by weak German data showing that industrial orders in March suffered their biggest monthly drop since last October.

The greenback was also boosted by safe haven buying as stocks dropped, dragged down by megacap growth stocks. [.N]

Wednesday’s Fed meeting was “the first time in a long time that Powell and the Fed have not become incrementally more hawkish,” said Erik Nelson, a macro strategist at Wells Fargo in New York.

“I think that’s a game changer in terms of the one-way upward move in the dollar and rates and I do think we’ll have continued pullback in the dollar here over the next few days,” Nelson said, though he added that “what really happens now is going to hinge on the data.”

Consumer price inflation data next Wednesday will be watched for any signs that price pressures that have been rising at the fastest pace in 40 years are easing.

This week’s major U.S. economic release will be the government’s jobs report for April released on Friday.

The dollar index was last at 103.43, up 0.87% on the day. It reached 103.93 last Thursday, the highest since December 2002.

The euro fell to $1.0551, down 0.67%, after dropping to $1.0470 last Thursday, the lowest since January 2017.

The single currency has fallen as the region struggles with weaker growth and energy disruptions due to sanctions imposed on Russia after its invasion of Ukraine.

The European Central Bank should not raise interest rates in July, even though the inflation outlook suggests it can gradually reduce support for the economy, ECB board member Fabio Panetta told Italian newspaper La Stampa.

Money markets expect an ECB interest rate hike as early as July.

The pound tumbled after the Bank of England raised interest rates to their highest since 2009 but warned that the economy was at risk of recession.

Sterling fell 2.10% to $1.2371, the lowest since July 2020.

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Currency bid prices at 10:25AM (1425 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 103.4300 102.5500 +0.87% 8.119% +103.5300 +102.3400

Euro/Dollar $1.0551 $1.0622 -0.67% -7.20% +$1.0642 +$1.0536

Dollar/Yen 130.1550 129.1200 +0.79% +13.05% +130.3300 +128.7550

Euro/Yen 137.31 137.09 +0.16% +5.36% +137.5700 +136.8400

Dollar/Swiss 0.9845 0.9724 +1.26% +7.95% +0.9853 +0.9709

Sterling/Dollar $1.2371 $1.2636 -2.10% -8.53% +$1.2632 +$1.2362

Dollar/Canadian 1.2804 1.2737 +0.55% +1.29% +1.2809 +1.2713

Aussie/Dollar $0.7135 $0.7256 -1.65% -1.84% +$0.7266 +$0.7133

Euro/Swiss 1.0385 1.0323 +0.60% +0.15% +1.0389 +1.0318

Euro/Sterling 0.8526 0.8403 +1.46% +1.50% +0.8545 +0.8407

NZ $0.6439 $0.6544 -1.58% -5.91% +$0.6568 +$0.6438

Dollar/Dollar

Dollar/Norway 9.4300 9.2410 +2.08% +7.08% +9.4330 +9.2090

Euro/Norway 9.9540 9.8297 +1.26% -0.61% +9.9545 +9.7743

Dollar/Sweden 9.8834 9.7386 +0.74% +9.60% +9.8945 +9.7205

Euro/Sweden 10.4285 10.3516 +0.74% +1.90% +10.4297 +10.3298

(Reporting by Karen Brettell; Editing by Andrea Ricci)