Forex – Dollar eases, remains close to 14-year highs

U.S. dollar notes are seen in this November 7, 2016 picture illustration. Picture taken November 7. REUTERS/Dado Ruvic/Illustration
U.S. dollar notes are seen in this November 7, 2016 picture illustration. Picture taken November 7. REUTERS/Dado Ruvic/Illustration

Investing.com – The dollar eased against a basket of the other major currencies on Wednesday as investors took profits following a rally which propelled the greenback to fresh 14-year highs.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.17% to 103.06.

The index hit highs of 103.81 on Tuesday, the most since December 2002, after the Institute for Supply Management said its index of manufacturing activity rose to a two-year high in December.

The upbeat data fed into expectations for a faster rate of policy tightening from the Federal Reserve this year, after it hiked interest rates for the first time in a year last month.

Markets were looking ahead to Friday’s U.S. nonfarm payrolls report for December for indications on solid growth in the labor market, which could enable the Fed to keep pushing up interest rates.

Higher rates typically boost the dollar by making dollar assets more attractive to yield-seeking investors.

The dollar was little changed against the yen, with USD/JPY at 117.75, off Tuesday’s three-week highs of 118.6.

The euro pushed higher, with EUR/USD climbing 0.22% to 1.0428. The single currency touched lows of 1.0341 on Tuesday, the weakest level since December 2002.

Sterling also moved higher, with GBP/USD rising 0.27% to 1.2273, recovering from a two-month low of 1.2197 struck overnight.

The Australian and New Zealand dollar were also stronger, with AUD/USD up 0.73% at 0.7271 and NZD/USD trading at 0.6944, up 0.39% for the day.

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