NEW YORK: The dollar retreated on Wednesday from the previous day's multi-month highs against the euro and other major currencies in a lightly traded session due to the U.S. Veterans Day holiday.
The greenback has been strong of late in anticipation of a Federal Reserve interest rate increase in December, a belief fortified by last week's unexpectedly strong data on U.S. employment. Strategists said the modest decline was related more to technical factors in light trading.
"The moves today look technical more than anything but there is some dollar weakness," said Ulrich Leuchtmann, head of FX research at Commerzbank in Frankfurt.
The dollar index was down 0.2 percent to 99.052 after touching its highest in seven months Tuesday. Volumes were expected to be reduced with the U.S. Treasury market closed for the holiday, said Charles St. Arnaud, senior strategist and economist at Nomura Securities International in London.
European Central Bank President Mario Draghi, speaking at the Bank of England Open Forum, did not address monetary policy, instead discussing deposit insurance across the euro zone.
The euro was up slightly against the dollar, last trading at $1.0731, after dropping below $1.07 for the first time in more than six months Tuesday morning.
Draghi and several other board members have said that extending the ECB's quantitative easing program, increasing the size of asset purchases and cutting its already negative deposit rate are being considered ahead of the bank's December meeting. Draghi speaks again Thursday and is expected to discuss policy.
The dollar fell modestly against the yen, sterling , Swiss franc, and the Australian, New Zealand and Canadian dollars.
The Australian and New Zealand dollars were the biggest movers against the dollar overnight and largely held onto gains of nearly half a percent on Wednesday.
The Reserve Bank of New Zealand's latest financial stability report warned of risks from a 27 percent surge in house prices this year in the capital Auckland, read by markets as a sign the bank might have to keep a tighter rein on policy in response.
"The kiwi jumped on these headlines as the market interpreted them as less dovish," said Sue Trinh, a strategist with RBC Capital Markets in Sydney.
Sterling, which has also recovered some ground after sharp falls last week, inched higher after a mixed bag of wage data and jobs numbers. It was 0.5 percent up on the day at $1.5175.
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