The dollar nudged higher on Thursday after a volatile two days that saw sharp declines followed by a rebound as traders took incoming economic data as signalling the Federal Reserve will wait longer before cutting interest rates.

The dollar index - which tracks the U.S. currency against six other units - rose 0.2% to 104.53. It fell by 1.51% plunge on Wednesday - its largest drop for a single trading day in a year.

The euro was flat around $1.084 , while sterling was down 0.2% at $1.2385. The dollar was down 0.1% against the yen at 151.27.

The dollar drew some support from better-than-expected retail sales combined with more signs of cooling inflation, feeding into the narrative for an economic "soft landing", which would give the Fed more time before cutting rates.

Traders remain certain that rates will not go higher, but have trimmed the odds for a first reduction by March to less than 1-in-4 from better than 1-in-3 a day earlier, according to the CME Group's FedWatch Tool.

Elsewhere, the Aussie eased 0.5% to $0.6479, while the New Zealand dollar fell 0.8% to $0.598.

The Australian currency failed to draw support from a strong rebound in employment, as traders keyed on the fact that gains were mostly in part-time labour, while the jobless rate actually ticked higher.

Source : Reuters