Dollar rebounds as global market rally fades

LONDON, Oct 5 (Reuters) – The dollar rose on Wednesday, a day after suffering its biggest one-day drop in more than two years, as the excitement of the previous day’s rally in stocks and risk-friendlier currencies wore off.

The dollar index was last up 0.64% to 110.87, after tumbling 1.3% on Tuesday. The index, which measures the greenback against a basket of major currencies, has fallen just under 4% since touching a 20-year high of 114.78 last week.

The euro fell 0.67% to $0.9921 after rising 1.7% on Tuesday.

Sterling was down 1.08% to $1.1352, after rising for six straight sessions. Its fall extended slightly as UK Prime Minister Liz Truss pledged to bring down debt as a share of national income, just over a week after the government’s plans to slash taxes and ramp up borrowing spooked markets.

Recent gains for most major currencies against the dollar have been underpinned by hope among investors and traders that the U.S. Federal Reserve will raise interest rates by less than previously expected.

A bigger-than-anticipated fall in the number of job openings in August was the latest evidence that the U.S. economy is gradually slowing. The U.S. benchmark S&P 500 stock index (.SPX) jumped more than 3% on Tuesday.

“The data is suggesting a slightly better inflation backdrop,” said Harry Adams, chief executive at foreign exchange company Argentex. “(Fed policymakers) are unlikely to be as aggressive as they have been over the last few months.”