US Dollar index holds near 14-year high

[NEW YORK] The US dollar was little changed on Monday versus a basket of currencies, holding near a 14-year peak buttressed by expectations of fiscal stimulus from US President-elect Donald Trump and a faster pace of interest rate increases.

The greenback scaled back from its highest since early February against the yen as data that showed Japan's export performance improved strongly in November spurred a burst of profit-taking.

The US dollar, which has rallied since Trump's win on Nov 8, will likely trade in a tight range in coming days on dwindling liquidity, analysts said.

Profit-taking and lower US Treasury yields would keep the greenback from rising further, they said.

"The US dollar would be reasonably sideways between now and the end of the year," said Jason Weinwand, founder and chief executive officer of FirstLine FX in Randolph, New Jersey.

The US dollar index which measures the greenback versus the euro, yen and four other currencies, was up 0.03 per cent at 102.98. On Dec 15, it reached 103.56 which was its highest since Dec 2002.

Traders await a speech from Fed Chair Janet Yellen at 1830 GMT for possible hints that last week's Fed meeting, where policy-makers signaled the central bank could increase interest rates three times in 2017, was interpreted by markets as more hawkish than had been intended.

US interest rates futures implied traders saw about a 46 per cent chance the Fed would hike at least three times in 2017 with the next increase likely in June, according to CME Group's FedWatch program.

Prospects of more rate hikes supported bullish bets on the US dollar. Data released on Friday showed US dollar net long positions were little changed on Dec 13. Net shorts on the yen rose to their largest since early December last year.

The Bank of Japan started a two-day policy meeting on Monday, at which it is expected to keep its 10-year government bond yield target as the weaker yen helps Japan's economic prospects, a Reuters poll showed on Friday.

"The speed of the yen's weakening was likely much faster than the BOJ anticipated," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank in Tokyo.

The US dollar was down almost 0.9 pec ent at 117.13 yen after climbing to 118.66 yen on Dec 15 which was the highest since Feb 2, according to Reuters.

REUTERS