Fed clues remain in focus as dollar dips.

On Thursday, the dollar index fell, but it rebounded from a three-week low as investors awaited new data to determine when the U.S. Federal Reserve will start reducing interest rates.

The greenback has experienced fluctuations this year due to strong growth and persistent inflation, causing traders to delay their expectations for when the U.S. central bank will ease monetary policy. However, after reaching a three-month high last week, the U.S. currency has mostly remained stable.

Noel Dixon, senior macro strategist at State Street Global Markets in Boston, stated that the dollar is likely to benefit from divergences with other countries as the U.S. economy looks relatively stronger.

To break out, the dollar requires more data.

The Dow Jones Industrial Average fell to its lowest level since February 2nd, holding below the highest level reached on February 14th, which was the highest since November 14th.

The next major release of Personal Consumption Expenditures (PCE) may offer insights into Fed policy.

The Fed's January meeting minutes released on Wednesday revealed that most policymakers were concerned about the risks of cutting interest rates too soon as they aim to bring inflation closer to the 2% annual target.

Philip Jefferson, the Fed Vice Chair, stated on Thursday that he will consider a range of economic indicators before deciding to lower interest rates, rather than solely relying on one metric.

Last week, the number of jobless claims in the U.S. unexpectedly decreased, while the country's business activity slowed down in February, with a measure of prices paid for inputs reaching its lowest level in nearly 3-1/2 years.

In January, the seasonally adjusted annual rate of home sales increased by 3.1% to 4.00 million units, which is the highest level since August.

Dixon stated that the U.S. dollar may be supported by weakness in other regions, such as Canada and Australia, which could cause their central banks to cut rates before the Fed.

In January, Canada's annual inflation rate slowed significantly more than anticipated, while Australia's unemployment rate was surprisingly low, despite the jobless rate increasing to a two-year high.

The euro zone business activity showed signs of recovery in February, as the downturn eased and the stock price reached its highest since February 2, up 0.04% to $1.0821.

The pound strengthened to $1.2710 earlier, the highest since February 2, after data from a British business activity survey showed unexpectedly strong growth for services firms, resulting in a 0.2% increase to $1.2658.

The greenback fell 0.15% to 150.50, just below its three-month high of 150.88 against the Japanese currency on Feb. 13.

The Bank of Japan and Ministry of Finance intervention signs will be closely monitored by traders if the yen continues to weaken.

On Thursday, Shunichi Suzuki, Japan's Finance Minister, stated that the government lacked a defense line for foreign exchange rates, but it was crucial to monitor market volatility as the yen has recently weakened against the dollar.