By Kevin Buckland

TOKYO (Reuters) - The dollar remained under pressure on Wednesday after retreating from a nearly three-month high against the euro in the previous session with a decline in U.S. bond yields adding to the drag.

Analysts pointed to technical factors for the dollar's pullback, following a two-day rally of as much as 1.4% against the euro after unexpectedly strong U.S. jobs data and more hawkish rhetoric from Federal Reserve Chair Jerome Powell scuppered bets for an early interest rate cut.

U.S. Treasury yields also turned down from highs overnight on solid demand at a sale of new three-year notes, removing some support for the dollar.

The dollar was little changed at $1.0755 per euro in early Asia trade on Wednesday, after retreating 0.1% on Tuesday, when it had earlier touched the strongest level since Nov. 14 at $1.0722.

The U.S. dollar index - which measures the currency against six major peers, including the euro - was flat at 104.14, following Tuesday's 0.29% slide. It had reached the highest since Nov. 14 at 104.60 on Monday.

"The U.S. dollar can be excused for being the weakest FX major on Tuesday, as it simply looks like a retracement against that bullish two-day move between Friday and Monday," said Matt Simpson, senior market analyst at City Index.

"But let us not lose sight of the fact that the U.S. dollar index retains a bullish daily structure," and a pullback could set it up for the next leg higher, he said.

The dollar was steady at 147.905 yen, after sliding 0.49% overnight. The currency pair tends to be extremely sensitive to moves in Treasury yields.

Analysts and traders highlight next Tuesday's U.S. CPI data as a key test for rate bets.

Traders are currently pricing in a 19.5% chance of a cut in March, the CME Group's (NASDAQ:CME) FedWatch Tool shows, compared with a 68.1% chance at the start of the year.

"Financial markets are in the process of recalibrating their expectations for Federal Reserve policy," said James Kniveton, senior corporate forex dealer at Convera.

"If positive economic data, particularly on inflation, persists in the U.S., the tide could turn towards earlier rate cuts, potentially weakening the greenback further."

(This story has been corrected to remove an erroneous dollar index level in paragraph 7)

LONDON (Reuters) - British construction firms turned their most optimistic in two years as the prospect of interest rate cuts raised hopes of a turnaround in the sector, a survey showed on Tuesday.

The S&P Global/CIPS UK Purchasing Managers' Index's headline measure of the construction industry improved to 48.8 in January from 46.8 in December, its highest since August 2023 although still in no-growth territory.

Economists polled by Reuters had forecast a smaller rise to 47.3.

Tim Moore, Economics Director at S&P Global Market Intelligence, said customer demand appeared close to turning a corner as the economy picked up after a weak end to 2023.

"UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon," Moore said.

Construction firms said higher shipping costs pushed up prices paid for raw materials for the first time since last September.

There have been signs in other surveys that disruption to shipping in the Red Sea has delayed deliveries to British manufacturers.

Tuesday's PMI survey chimed with data from the Royal Institution of Chartered Surveyors, published last week, that showed a brighter outlook for the construction sector.

S&P Global said residential house-building continued to be the biggest drag on activity although the pace of decline was the softest since March last year.

Output in civil engineering was close to stabilisation and commercial building also shrank by less than in December, S&P Global said.

Overall new orders growth showed the slowest rate of decline since they started to contract in August 2023 and employment fell only slightly.

The wider all-sector PMI, which includes previously released services and manufacturing figures, rose to its highest in eight months at 52.6 from December's 51.7.

(Reuters) - Deutsche Bank no longer expect the U.S. economy to tip into recession this year, given cooling inflation and the labor market returning to a "better balance" without unemployment rising significantly.

The brokerage earlier expected the economy to enter a mild recession as the Federal Reserve tightened interest rates to tame inflation, narrowing the window for a soft landing.

Deutsche Bank said in a note on Monday that it now expects the U.S. economy to grow by 1.9% this year, on a quarterly average basis, compared with its prior forecast of 0.3%.

"Though the economy continues to face several headwinds – namely, still-tight credit conditions, rising consumer delinquency rates and a slowing labor market – the resilience to date points to a more benign slowdown in 2024 than we had previously projected," said Matthew Luzzetti, the brokerage's chief U.S. economist.

Deutsche Bank still expects the Fed to start easing interest rates from June, but now expects 100 basis points (bps) of rate cuts this year, less than its earlier expectation of 175 bps.

The U.S. economy grew a faster-than-expected 3.3% in the fourth quarter, amid strong consumer spending, with growth for the full year coming in at 2.5%, shrugging off dire predictions of a recession after the Fed's aggressive rate hikes.

TOKYO (Reuters) - Bank of Japan Governor Kazuo Ueda said on Tuesday the central bank will examine whether to continue its purchases of risky assets, as well as other stimulus means, when sustained achievement of its 2% inflation target comes into sight.

The decision on whether to unload the BOJ's holdings of risky assets, such as exchange-traded funds (ETFs), can be made at a later date, he told parliament.

By David Lawder

WASHINGTON (Reuters) -The Biden administration has sent five senior U.S. Treasury officials to Beijing this week for economic talks that will include China's "non-market" policies that are adding excess industrial capacity, a Treasury official said on Monday.

The delegation, led by Treasury Undersecretary for International Affairs Jay Shambaugh, planned to hold frank conversations on Monday and Tuesday as part of the U.S-China Economic Working Group about Beijing subsidies that the U.S. says encourage overproduction of goods, potentially flooding global markets.

Affected industries include electric vehicles, a sector whose development in the United States the Biden administration is trying to boost with its own tax subsidies.

The group will discuss the U.S. and Chinese economic outlooks, investment screening regimes for national security in both countries, and opportunities to cooperate on climate change and debt relief to poor countries, the Treasury official said.

The emphasis on China's industrial subsidies comes as the Biden administration is continuing a review of U.S. tariffs imposed on hundreds of billions of dollars worth of Chinese imports by former President Donald Trump.

U.S. Treasury Secretary Janet Yellen and other senior administration officials have called for the punitive duties of up to 25% to be shifted to a more strategic focus.

Trump, the expected Republican presidential nominee, has signaled he would double down on stronger tariffs if elected, calling for China's most-favored nation trading status to be revoked, a move that would effectively raise nearly all tariffs on Chinese goods. Biden is expected to take a tough but more nuanced approach to China.

The meeting is the third since Yellen and her Chinese counterpart, Vice Premier He Lifeng, launched the group in September alongside the parallel Financial Working Group.

That group met in Beijing in late January, with Treasury officials receiving assurances that Chinese banks were "doing well" despite China's real estate and financial market turmoil, according to Yellen.

The meetings are the first for the economic group in Beijing. The group last met in San Francisco ahead of November's Asia Pacific Economic Cooperation Summit after an initial virtual meeting.

ㅊBy Ankur Banerjee

SINGAPORE (Reuters) - The U.S. dollar was perched near a three-month peak on Tuesday, buoyed by elevated Treasury yields, on growing expectations that the Federal Reserve is unlikely to cut interest rates aggressively this year.

The dollar index, which measures the U.S. currency against six rivals, was at 104.42, having touched 104.60 on Monday, its highest since Nov. 14. The index is up 3% for the year so far after dropping 2% in 2023.

Data on Monday showed U.S. services sector growth picked up in January as new orders increased and employment rebounded, indicating a strong start to the year for the economy and comes after a blowout jobs report last week.

The string of robust U.S. economic data has quashed any lingering hopes of early and steep interest rate cuts by the Fed, with Fed Chair Jerome Powell and other policymakers also pushing back against the notion.

Traders have been scaling back rate cuts bets since the beginning of the year and are currently pricing in only a 15% chance of a cut in March, the CME FedWatch tool showed, compared with a 69% chance at the start of the year.

They are also now pricing in 115 basis points (bps) of cuts this year, compared with around 150 bps of easing anticipated in early January.

"There may still be a bit of room to scale back (more) but it's likely limited given that the disinflation trend in the US is becoming more entrenched and that labour market tightness is gradually easing," said Christopher Wong, a currency strategist at OCBC in Singapore.

Investor focus in Asia will be on the policy decision from the Reserve Bank of Australia later in the day, with the central bank widely expected to stand pat on rates, leaving comments from Governor Michele Bullock in the spotlight.

Investors have moved to push back bets for the first rate cut from the RBA to August, rather than June, with economists polled by Reuters also expecting the central bank to stay steady on rates well into the second half of this year.

The Australian dollar was little changed at $0.64835 ahead of the decision, loitering around its lowest since Nov. 17.

In other currencies, the euro was up 0.02% at $1.0743, while sterling last fetched $1.254, up 0.06% on the day but remained close to the seven-week low it hit on Monday.

The pound's fall on Monday came despite some upbeat economic data. Figures showed that the unemployment rate was likely much lower late last year than previously thought, which could push out rate cuts there, too.

"The tighter than expected UK labour market supports our view that interest rate cuts are still some way off," said Kristina Clifton, FX strategist and economist at Commonwealth Bank of Australia (OTC:CMWAY) in a note.

"We expect the first cut in August versus current market pricing for the June cut."

The Japanese yen strengthened 0.07% to 148.56 per dollar, hovering around a two-month low of 148.90 it touched on Monday.

Japan's real wages fell for a 21st straight month though at a slower pace, while household spending dropped for a tenth consecutive month, showing that inflation outpaced wage recovery and continued to weigh on consumer spending.

By Pavel Polityuk

KYIV (Reuters) - Ukrainian agrarian unions have asked the government to do everything possible to maintain free access to the European market for their food products, the UCAB association said on Monday.

The European Commission last week said it would extend the suspension of import duties on Ukrainian exports, originally put in place to support the economy after Russia's invasion two years ago, for another year to June 2025.

However, it also proposed measures to limit agricultural imports from Ukraine and offer greater flexibility on rules for fallow land in a bid to quell protests by angry farmers in France and other EU members.

"These preferences were particularly important for Ukraine's agricultural sector... enabling Ukrainian exporters to maintain production and jobs and ensure foreign exchange earnings in 2022-2023," the UCAB business association said on Facebook (NASDAQ:META).

UCAB said exports of food products in 2023 totalled $21.9 billion and accounted for 61% of all exports from Ukraine.

At the same time, the EU's share of total agricultural products from Ukraine in 2023 reached 56.6% or $12.4 billion.

UCAB said that the issue of maintaining the most open access to the EU market would be vital for the country's trade balance in the coming years and the survival of Ukraine's agricultural sector.

"The agricultural community calls on the authorities to facilitate the continuation of preferential access to the EU market for Ukrainian agricultural products and to establish a direct dialogue with European partners," it noted.

The EU suspended import duties, quotas and trade defence measures in June 2022 but cheap Ukrainian grain exports have since sparked protests by governments, farmers and truckers in neighbouring countries such as Poland and Hungary.

Ukraine is a global producer and exporter of agricultural products and has traditionally used sea routes to supply food to countries in North Africa, the Middle East and Asia.

However, after the Russian invasion blocked the country's main Black Sea ports, Ukraine was forced to divert its cargoes through land borders with some goods settling in neighbouring markets and depressing prices.

By Ann Saphir and Howard Schneider

(Reuters) -U.S. banks anticipate an increase in demand for loans as interest rates fall this year, even as they further tighten credit standards on some types of loans, according to a Federal Reserve survey of senior bank lending officers published on Monday. 

Banks cited deterioration in collateral values and a less favorable economic outlook as reasons they will likely tighten standards on commercial real estate, credit card and auto loans this year, the survey showed. They also expect loan quality to deteriorate across most types of loans, according to the survey.

But the survey also showed a smaller proportion of banks tightening lending standards in the fourth quarter of 2023 compared to the prior quarter, and that loan demand improved slightly.

"The move in the direction away from severe tightening and towards net easing is probably a favorable development for economic activity," wrote JPMorgan economist Daniel Silver.

Fed officials had the survey data when they decided to keep the policy rate steady in the 5.25% to 5.5% range and signal that interest rate cuts are on tap for this year but unlikely before May.

The survey findings are "unlikely to generate any urgency for easing," wrote Dave Sloan, a senior economist at Continuum Economics.

In its post-meeting statement, the Fed notably dropped a reference to the likelihood that tight credit will weigh on economic activity.

Overall the loan officers' survey shows "the worse of monetary tightening for the financial market may be behind us," wrote RSM US economist Tuan Nguyen, with all indicators showing significant improvement since last July, when the Fed delivered the final rate hike in its tightening campaign.

Last week shares of New York Community Bancorp (NYSE:NYCB) plunged after the regional lender reported stresses in its commercial real estate loan portfolio, touching off broader worries about the health of some smaller U.S. banks.

(Reuters) - German exports fell more than expected in December due to weak global demand, data from the federal statistics office showed on Monday.

Exports fell by 4.6% in December compared with the previous month. The result compared with a forecast 2.0% decrease in a Reuters poll.

Imports fell by 6.7% from November, the federal statistics office reported, versus analysts' expectations for a 1.5% decline. 

In the year 2023, exports were down 1.4% compared with 2022, while imports to Germany experienced a much sharper decline of 9.7%.

BANGKOK (Reuters) - Thailand's annual consumer inflation rate fell to its lowest in 35 months in January, the commerce ministry said on Monday.

The headline consumer price index (CPI) fell 1.11% from a year earlier, versus a 0.83% year-on-year fall in the previous month.

The figure compared with a forecast fall of 0.82% for January in a Reuters poll.

The core CPI increased 0.52% year-on-year in January, versus a forecast rise of 0.57%.

The decline in January was the fourth in as many months and was driven by government energy subsidies, lower food prices, and a high base effect from last year, the ministry said.

It was the ninth straight month that headline inflation was below the central bank's target range of 1% to 3%.

(This story has been corrected to say inflation fell to 35-month low, not the consumer price index, in paragraph 1)