The dollar moved higher against a currency basket on Wednesday as the euro paused after having rallied to more than three year highs overnight amid growing expectations that the European Central Bank will scale back stimulus this year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.28% to 90.48 by 03:06 AM ET (08:06 AM GMT). The index plumbed a three year low of 89.98 overnight.
EUR/USD was down 0.31% to 1.2222, after rising as high as 1.2323 overnight, which was the strongest level since December 2014.
The single currency has strengthened broadly since last week’s minutes of the ECB’s December meeting showed that officials were considering a gradual shift in policy guidance from early this year.
Any changes to the bank’s guidance would likely been seen by investors as an indication that policymakers are preparing to winding down their bond buying stimulus program.
The euro had slid to a low of 1.2194 on Tuesday following a report that the ECB is unlikely to drop a pledge to keep buying bonds at its upcoming meeting next week.
The dollar has been pressured lower by the view that the global economic recovery will outpace U.S. growth and prompt other major central banks, including the ECB to begin unwinding loose monetary policy at a faster pace.
The dollar moved higher against the yen, with USD/JPY rising 0.31% to 110.79, pulling away from the four-month low of 110.18 reached overnight.
Sterling was lower against the firmer dollar, with GBP/USD losing 0.22% to trade at 1.3761, after rising as high as 1.3835 overnight, the highest level since Britain’s vote to exit the European Union in June 2016.
The Australian and New Zealand dollars were broadly lower against their U.S. counterpart, with AUD/USD last at 0.7945 and NZD/USD down 0.37% to 0.7241.
The Canadian dollar was slightly lower against the greenback, with USD/CAD up 0.16% to 1.2453 ahead of the Bank of Canada’s monetary policy decision later in the day. The BoC was widely expected to raise rates to 1.25% from 1%.
