The dollar edged higher against a basket of major currencies on Wednesday ahead of a news conference by US President-elect Donald Trump in which he is expected to spell out more about his plans for the economy.
The dollar index rose 0.2 per cent to 102.18.
The dollar rally sparked by Trump’s surprise victory in the November election has shown signs of fading, as the index has gone from a 14-year peak of 103.82 scaled on January 3 to a low of 101.30 over the past week.
The euro was down 0.1 per cent at $1.0545 after brushing a 10-day high of $1.0628 overnight.
The dollar firmed 0.3 per cent to 116.100 yen. It had suffered two days of losses against the safe-haven Japanese currency.
Currency pairs settled into a narrow range ahead of Trump’s news conference - his first since the election - which is due to start at around 11:00 EST (1600 GMT) neared.
“I did not expect the Tokyo session to be this quiet,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
“It reflects the level of caution prevailing in the market before Trump’s appearance.”
Trump’s stimulus measures
Over the past two months, expectations that the Trump administration would enact economic stimulus measures backed by massive fiscal spending have taken Wall Street to record highs, US debt yields to levels unseen since 2014 and the dollar index to the 14-year high.
Against that backdrop, financial markets are keen to see how Trump will follow through on campaign pledges.
“The dollar is set to resume the Trump rally if he provides specifics of stimulus measures, notably those related to tax cuts, which appear achievable,” said Junichi Ishikawa, senior FXstrategist at IG Securities in Tokyo.
“On the other hand, the market is also focused on potential risk factors, like Trump taking a tough stance against China. That could prompt the dollar to fall against the yen.”
Sterling under pressure
Elsewhere in the markets, sterling dipped 0.1 per cent to$1.2168 to inch back towards a two-month low of $1.2107 set overnight.
Worries about the terms of Britain’s departure from the European Union have kept the currency under heavy pressure this week.
The Australian dollar was flat at $0.7372 after popping up to $0.7385 overnight, its highest since mid-December. The US dollar’s stall this week and rise in iron ore and coal prices have shored up the Aussie this week.
The New Zealand dollar held steady at $0.6987,after touching a four-week high of $0.7048 on Tuesday.