SYDNEY: The dollar touched a fresh two-week high against the yen on Tuesday, but struggled to make further headway in a market subdued by a holiday in Japan.
A record-closing high on Wall Street had helped lift the greenback against the yen in New York, and modest follow-through buying in Asia saw the dollar come close to 120.20.
However, momentum quickly faded in thin year-end conditions, leaving the greenback stuck in a very slim 120.01/120.19 range and short of a 7-1/2 year peak of 121.86 set earlier in the month.
The euro was equally muted, holding at two-year lows just above $1.2200. All that kept the dollar index tantalisingly close to a nine-year peak set in New York.
Commodity currencies fared no better with the Australian dollar pinned near a 4-1/2 year low of $0.8107 plumbed last week.
Investors stuck to a familiar theme of buying the greenback against almost everything else in an absence of any new drivers and amid speculation that the Federal Reserve will hike interest rates sometime next year.
Those expectations have widened the premium offered by two-year US debt to 75 basis points over German bunds, the fattest margin since early 2007.
A pre-Christmas holiday rush of US data due later in the day could further highlight the diverging policy outlook between the United States and most of the developed world.
Among them, third quarter gross domestic product is expected to be revised up, putting US economic growth above a 4-percent annualised rate for a second straight quarter. "We are likely to see some impressive US data on Tuesday.
This would be the first time since 2003 we have seen two consecutive quarters of GDP growth above 4.0 percent," analysts at BNP Paribas wrote in a note to clients.
They also expected a solid pick up in personal income and spending as well as a marked improvement in durable goods orders.
Such upbeat results should go some way in countering worries about a currency meltdown in Russia and political uncertainty in Greece, factors that have roiled markets recently.
Japanese markets will reopen on Wednesday, just as many major global financial centres wind down for the Christmas holiday on Thursday.
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