The dollar index wallowed near six-week lows on Wednesday, pressured by U.S. President-elect Donald Trump's comments showing concern over the currency's strength, while sterling edged down after posting its biggest one-day gain since at least 1998 after British Prime Minister Theresa May outlined her 'Brexit' plans.
The dollar index, which measures the greenback against the six major peers, last stood at 100.41, up 0.1 percent, after falling to 100.26 on Tuesday, its lowest since Dec. 8.
A sell-off in the dollar deepened after U.S. traders returned from a long weekend after Martin Luther King Jr Day and reacted to Trump's weekend comments. In an interview with the Wall Street Journal, Trump said U.S. companies "can't compete with (China) now because our currency is strong and it's killing us."
The dollar had surged at the end of 2016 on expectations that Trump's proposed fiscal stimulus boost growth and inflation. But on the other hand, Trump has also continued to strike a harsh tone toward Beijing, and his protectionist rhetoric is beginning to play a larger role in investors' expectations.
"If the U.S. government officials further talk down the dollar, the greenback could weaken and the correlation to the interest rate differentials may end," said Junya Tanase, chief forex strategist at J.P. Morgan in Tokyo.
Higher U.S. Treasury yields had fuelled demand for the dollar relative to currencies such as the euro and yen.
The dollar added 0.2 percent to 112.79 yen, after hitting a seven-week low of 112.60 yen on Tuesday. The yen has strengthened for seven straight sessions.
The euro last stood at $1.07064, slightly below $1.07195 hit on Tuesday, its highest level since Dec. 8.
Sterling, meanwhile, slipped 0.3 percent to $1.2382, after it marked the biggest one-day percentage gain since at least 1998 on Tuesday, after May's speech.
May pledged to hold a parliamentary vote on whatever deal Britain eventually reaches to leave the European Union. As expected, May said Britain will pull out of the European Union's single market when it exits the bloc and not look for a compromise deal to retain some of its benefits.
Sterling rose by about 3 percent against the dollar on Tuesday, touching its highest level in nearly two weeks and posting its biggest gain according to Thomson Reuters Matching data, which goes back to 1998.
Reuters
Wed Jan 18 2017
The dollar index, which measures the greenback against the six major peers, last stood at 100.41, up 0.1 percent, after falling to 100.26 on Tuesday, its lowest since Dec. 8. - REUTERS pic
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