The U.S. dollar weakened against many of its major rivals on Tuesday, pulling back from earlier gains as investors bet that the recent rally has gotten overdone.
The currency has been in an uptrend this month amid expectations that the Federal Reserve will raise rates in December, and that policies undertaken by the incoming presidential administration would spur faster growth. The currency also was supported in morning trading after data showed that third-quarter GDP expanded at a 3.2% annual pace—the fastest rate in over two years. The bullish report was seen as further evidence that the Fed could raise rates, which it has said it would do when it deems the economy strong enough to withstand such a move.
The U.S. dollar index DXY, +0.03% which measures the greenback against a half-dozen rivals, fell 0.3% to 101, having earlier risen as high as 101.64. At current levels, it is within striking distance of 101.92, the highest level for the index since 2013. The WSJ Dollar Index BUXX, +0.06% which measures the buck against a larger basket of currencies, dipped 0.1% to 91.35; it earlier rose more than 0.5% on the day.
While the U.S. dollar index is up 2.8% thus far this year, it has surged more than 3% since the presidential election earlier this month.
“The dollar has had a nice rally postelection, and its just losing some momentum as people back off from the Trump trades that have worked the most. But I remain a dollar bull, and I wouldn’t be surprised to see strength return to it later this week,” said Mike O’Rourke, chief market strategist at JonesTrading.
The euro EURUSD, -0.1127% was at $1.0643 from $1.0615 late Monday. While the currency erased its earlier losses, it continues to trade near its lowest level since March 2015. Caution was running high in Europe ahead of Italy’s referendum on proposed constitutional reforms on Sunday. Analysts fear a rejection could unleash political and economic uncertainty in a country that is already battling with a banking crisis.
On Monday, the euro rallied following the results of the center-right primaries in France over the weekend, which social conservative François Fillon won by a landslide. The free-market advocate is seen as a strong enough candidate to take on populist far-right National Front leader Marine Le Pen in April and May’s presidential election and thwart the antiestablishment drive that has swept the U.S. and large parts of Europe.
The British pound GBPUSD, -0.1601% rose to $1.2503 from $1.2415. Despite the 0.7% rise on the day, the U.S. currency remains near the multidecade lows it has been trading at ever since the country’s unexpected vote to leave the European Union earlier this year.
Against the yen USDJPY, -0.01% the dollar remained in positive territory, changing hands at ¥112.41 from ¥111.90. The currency swung in a range of ¥111.76 and ¥113.35. Last week, the dollar hit its strongest level against the yen since March.
Currencies based in countries that have heavy exposure to the commodity market fell on Tuesday, impacted by the move in crude oil CLX7, +0.32% which sank 3.9% ahead of a key OPEC meeting. Against the Canadian dollar USDCAD, +0.0223% the buck traded at C$1.3421 from C$1.3405, while the dollar rose 1% against the Russian ruble USDRUB, +0.0922% The ruble traded at 65.16 to the dollar, compared with 64.72 late Monday. Check out: Ruble and Russian stocks tank as oil slides
Read: Here’s how ugly it could get for stocks if OPEC can’t reach a deal
—Additional reporting by Sara Sjolin
