LONDON: The dollar inched up in holiday-thinned trading on Wednesday, with most major currency pairs bobbing about in narrow ranges after data overnight painted a mixed picture of the U.S. economy.
After the U.S. Federal Reserve's widely anticipated interest rate hike last week, market attention has now turned to the pace of further rate hikes, which are likely to be data-dependent.
A mixed set of numbers on Tuesday showed U.S. GDP grew at 2 percent in the third quarter, slightly slower than the initial estimate. Core PCE, a measure of domestic core inflation which is also the Fed's preferred inflation measure, rose to 1.4 percent, slightly beating expectations.
U.S. consumer spending rose in November by 0.3 percent, according to data inadvertently released about 12 hours ahead of schedule. But other data showed U.S. home resales unexpectedly plunged 10.5 percent in November, their steepest drop since July 2010.
The dollar index, which tracks the greenback against a basket of six rival currencies, inched up 0.2 percent to 98.376 after marking three losing sessions, with the euro 0.4 percent down at $1.09185.
Volume was relatively thin however, with many investors already away for this week's Christmas holiday and Tokyo markets closed for the Japanese emperor's birthday.
Credit Agricole currency strategist Manuel Oliveri, said subdued risk appetite could boost the euro in the coming days. The currency has performed well this year at times of risk aversion, as investors have unwound euro-funded carry trades in which the euro is borrowed then sold for higher-yielding, riskier currencies.
"When you are in an environment where rate expectations are stable, the euro is mostly driven by risk sentiment," he said. "So we could imagine that the euro goes to $1.10 or so into the end of the year."
Traders were eyeing a final reading of UK GDP, due at 0930 GMT, for any impact on sterling. The currency hit an eight-month low of $1.4806 on Tuesday, with analysts citing growing worries about a British exit from Europe following a rerendum on the issue which could be held as early as June.
"The referendum is keeping uncertainty high and demand for sterling low, and ... that should continue for the coming weeks and months," Oliveri said.
The dollar was down slightly at 121.01 yen, well below its Friday high of 123.49 yen and not far from the one-week low of 120.72 it touched on Tuesday.
"Post the Fed's meeting, traders may be squaring up long USD positions, whilst others are reluctant to put on new positions into year-end," BNZ Senior Market Strategist, Kymberly Martin, said.
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