Early trade in New York: dollar retreats from 2018 high; seen as temporary pause

The dollar fell on Wednesday from its strongest levels in 2018 against a basket of currencies due to mild profit-taking, but is expected to resume its rise due to solid US economic growth and more interest rate increases from the Federal Reserve. The weaker greenback stemmed from a bounce in the euro, which hit a fresh year-to-date low in earlier trading.
"There's a little exhaustion with the long-dollar trade, but I don't think we've reached the end of it yet," said Ilya Gofshteyn, FX and global macro strategist at Standard Chartered Bank in New York. Concerns about the US exit from an international nuclear deal with Iran had also supported the dollar in early Asian trading. For now, traders put the issue on the backburner until there is a further development, analysts said.
"The market has kind of moved past this," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. At 9:47 am (1347 GMT), the index that tracks the dollar against six currencies slipped 0.17 percent to 92.946 after touching a 2018 peak of 93.416 earlier.
The three-week long rally for the US currency, in which it has reversed several months of weakness, has caused the unwinding of popular long bets on emerging market and G10 currencies. The euro hit a year-to-date low of 1.1821 earlier on Wednesday before reversing course to $1.1875, for a 0.1 percent gain on the day, according to Reuters data.
The dollar climbed 0.6 percent to 109.74 yen and edged up 0.07 percent to 1.0021 Swiss franc as worries about US President Donald Trump's decision to pull the United States out of the Iran nuclear deal faded somewhat.