LONDON, June 22: The dollar drifted higher on Thursday against the euro amid expectations from some sections of the market that US borrowing costs may be lifted by a hefty half point when the Federal Reserve delivers its next rate verdict.

The euro dipped to $1.2583 in late European trading from $1.2659 late Wednesday in New York.

The dollar rose to 115.89 yen from 114.86 on Wednesday.

While consensus is for the Federal Reserve to announce a quarter point hike to 5.25pc, some players are making more aggressive bids.

“Fundamentals appear to be taking a backseat to technicals today as market players begin to price in a small chance of a 50 basis point Fed rate hike at the end of the month,” said Michael Woolfolk at bank of New York.

“After failing to break above the 1.2700 level against the euro on Wednesday, the market has done an about-face and is now testing the other end of the range with technical support coming up quickly at 1.2530 and 1.2500 the figure,” he added.

The dollar has a big hurdle to clear Friday in the form of the US durable orders data.

Elsewhere, the pound continued lower on the news that David Walton, the only member of the Bank of England’s rate-setting body to vote for a rate hike in the last two months, had died.

The minutes to the June 8 meeting of the central bank's Monetary Policy Committee (MPC), published on Wednesday, showed that Walton was once again the only dissenting voice on the eight-member panel voting for a quarter-point hike in the repo rate to 4.75pc.—AFP