- Dollar index touches three-week high
- Sterling tumbles to ten-month low, euro also weaker
- Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
(Recasts, adds yuan, sterling, new analyst comment, updates prices)
The dollar retreated from a three-week high on Wednesday as investors cashed in on gains the currency made after two days of testimony by U.S. Federal Reserve Chairman Jerome Powell reinforced a strong economic outlook.
In congressional testimony on Tuesday and Wednesday Powell said he believed the United States was on course for years more of steady growth, and played down the risks to the U.S. economy of an escalating trade conflict.
Against a basket of six major currencies .DXY , the dollar rose to a three-week high of 95.4 before settling around 95.08, up 0.2 percent.
The retreat signaled a move by investors to cash in after "the dollar had a pretty good run," said David Gilmore, partner at FX Analytics in Westbrook, Connecticut.
The dollar gained 0.43 percent against sterling GBP= as the U.K. currency was dragged to 10-month lows on weak inflation data and uncertainty over Britain's plans to leave the European Union.
The Chinese yuan CNH= was down 0.41 percent against the dollar in offshore trading. Earlier in the session, U.S. President Donald Trump's top economic adviser accused Chinese President Xi Jinping of holding up a U.S.-China trade deal.
The greenback reserved most of its gains against the relatively higher-yielding currencies such as the Australian AUD= , Canadian CAD= , and New Zealand dollars NZD= .
Though concerns the U.S. economy may be nearing a peak as evident from a flattening yield curve and falling inflation adjusted-yields, the widening rate differentials between the U.S. and other major markets also lifted the greenback.
MIND THE GAP The Fed is expected to hike rates two more times in 2018 to tackle rising inflationary pressures. Comparatively, the ECB is expected to start raising rates only in mid-2019.
With U.S. rates continuing to rise and most other major central banks taking only tentative steps towards monetary normalization, many analysts expect more dollar upside. RBC is forecasting a year-end euro/dollar of $1.12.
The dollar rallied to as high as 113.13 against the yen JPY= , its strongest since Jan. 9. It was last at 112.85, slightly down on the day.
The euro fell 0.16 percent to $1.1640.
======================================================== Currency bid prices at 3:37PM (1937 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1640 $1.1659 -0.16% -2.97% +1.1665 +1.1602 Dollar/Yen JPY= 112.8400 112.8500 -0.01% +0.15% +113.1300 +112.7300 Euro/Yen EURJPY= 131.35 131.61 -0.20% -2.83% +131.7700 +130.8900 Dollar/Swiss CHF= 0.9994 1.0000 -0.06% +2.58% +1.0034 +0.9983 Sterling/Dollar GBP= 1.3056 1.3112 -0.43% -3.37% +1.3123 +1.3011 Dollar/Canadian CAD= 1.3172 1.3188 -0.12% +4.73% +1.3259 +1.3169 Australian/Doll AUD= 0.7397 0.7386 +0.15% -5.18% +0.7407 +0.7343 arEuro/Swiss EURCHF= 1.1633 1.1661 -0.24% -0.48% +1.1669 +1.1603 Euro/Sterling EURGBP= 0.8915 0.8890 +0.28% +0.36% +0.8931 +0.8875 NZ NZD= 0.6791 0.6782 +0.13% -4.16% +0.6804 +0.6744 Dollar/DollarDollar/Norway NOK= 8.1679 8.1509 +0.21% -0.48% +8.1994 +8.1453 Euro/Norway EURNOK= 9.5089 9.5058 +0.03% -3.45% +9.5405 +9.4918 Dollar/Sweden SEK= 8.8656 8.8388 +0.13% +8.09% +8.8869 +8.8362 Euro/Sweden EURSEK= 10.3215 10.3079 +0.13% +4.90% +10.3378 +10.2940 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ DXY and real yields http//reut.rs/2L2vpCh^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
