Dollar drifts below, euro firms

The dollar was little changed against a basket of currencies on Thursday, hovering below a 14-year high reached earlier this week as a modest bout of buying emerged following an early round of profit-taking. Traders brushed off mostly upbeat US economic data as they refrained from adding bullish dollar bets ahead of Christmas, analysts said.
"We have had a big rally and we are due to for a breather," said Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments in Minneapolis. The dollar index, which measures the greenback against a group of six major currencies, was marginally higher at 103.08 but still below 103.65 it set on Tuesday, which was its highest since December 2002.
The dollar posted a series of multiyear highs after the US Federal Reserve's hint last week that it might raise interest rates up to three times in 2017, which was one more than what some traders had expected. The dollar rally that started six weeks ago has been underpinned by bets that US President-elect Donald Trump and a Republican-controlled Congress would slash taxes and boost federal spending, resulting in higher growth and inflation.
As they awaited details on economic policies from the Trump administration, traders and analysts cautioned that the dollar, which has risen 5 percent on an index basis since November 8, was vulnerable to a further pullback. Still, most of them have not changed their longer-term positive view of the US currency. "The trend is definitely for a stronger dollar," Stephen Casey, senior currency trader at Cambridge Global Payments in New York. "Any dip in the dollar will a buying opportunity." Thursday's stronger-than-expected report on new orders for US capital goods in November and an upward revision on third-quarter US economic growth reinforced the view of a steady US expansion.
While the dollar rally paused, the euro held steady in the aftermath of plans to rescue Monte dei Paschi di Siena, Italy's second-biggest bank. The single currency hit a one-week high against the dollar, rebounding from a nearly 14-year low of $1.0350 set on Tuesday, Reuters data showed. It was last up 0.1 percent at $1.0429. The euro was up 0.1 percent at 122.67 yen. The dollar was flat at 117.57 yen after reaching 118.66 yen a week ago, which was its strongest level against the Japanese currency since early February.