Jan 7 (Reuters) - The dollar moved in tight ranges on Wednesday as investors shifted their focus to incoming U.S. economic data after shrugging off the U.S. intervention in Venezuela and the capture of President Nicolas Maduro.
Markets were in a wait-and-see mode ahead of a batch of U.S. labour market data, with figures on private payrolls and job openings due later in the day, before Friday's closely watched nonfarm payrolls report comes due.
Ahead of the outcome, the dollar index strengthened slightly to 98.63.
"Traders seem to be okay with the rhetoric coming from the U.S. when it does not imply that 'boots on the ground' will be needed to run Venezuela," said Thierry Wizman, global forex and rates strategist at Macquarie Group.
"A military invasion and a prolonged on-the-ground conflict would have risked a major dollar depreciation, as did the Iraq and Afghanistan wars in 2002-2008," he added.
Risks that President Donald Trump's administration could be forced to refund more than $133.5 billion in tariffs to importers if the U.S. Supreme Court declares his duties unlawful remain in the background, but could resurface to hurt the greenback.
Investors have struggled to get an accurate read of the world's largest economy following a record U.S. government shutdown last year which hampered the collection and release of key economic data. Expectations for a more dovish Federal Reserve has recently weighed on the dollar.
Oil prices fell on Wednesday and China denounced the U.S. as a bully after Trump's administration said it had persuaded Venezuela to divert supplies from Beijing.
JAPAN-CHINA TENSIONS UNDER THE SPOTLIGHT
The euro edged down after falling the previous day, as German inflation slowed more than expected in December, prompting traders to slightly scale back bets on a rate hike in early 2027.
Markets have been pricing policy rates to remain stable through 2026 since last summer, while expecting the European Central Bank to tighten policy in 2027 as inflationary pressures build from German fiscal stimulus.
The single currency was down 0.05% to $1.1684, after falling 0.28% on Tuesday.
Also on traders' radar, China on Tuesday banned exports of dual-use items to Japan that can be used for military purposes, marking Beijing's latest move in reaction to an early November remark by Japanese Prime Minister Sanae Takaichi about Taiwan.
The move didn't impact the forex market, strategists said. However, it weighed on the Japanese stock markets which lost 1% on Wednesday.
The greenback fell 0.11% against the Japanese yen to 156.51.
"Narrowing rate differentials support a more normalized euro/dollar range of 1.15–1.20," said Nadège Dufossé, global head of multi-asset at Candriam.
"After the euro’s adjustment, Asian currencies are likely to drive the next phase, where depreciation pressures persist amid trade tensions and policy uncertainty," she added.
However, some analysts said that the escalation of tensions between China and Japan could be used by the Bank of Japan as reason for caution in hiking rates again.
The Aussie dollar hit its highest since October 2024 at $0.6766, as a mixed inflation report kept alive the prospect of a near-term hike in interest rates. The New Zealand dollar bought $0.5783.
Reporting by Stefano Rebaudo; Editing by Shri Navaratnam, Ros Russell and Toby Chopra
