Dollar Backs Off 2018 Highs as Rally Pauses

© Reuters. Dollar backs off 2018 highs as rally pauses© Reuters. Dollar backs off 2018 highs as rally pauses

Investing.com – The dollar pulled back from the year’s highs against a currency basket on Wednesday, as currency traders took a breather after its run higher in the wake of President Donald Trump’s decision to pull the U.S. out of the nuclear deal with Iran.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, edged down 0.15% to 92.80 by 07:30 AM ET (11:30 AM GMT), after rising as high as 93.20 earlier, the most since December 19.

On Tuesday, Trump pulled the U.S. out of the international nuclear deal with Iran, raising the risk of conflict in the Middle East and a knock-on effect for global oil supplies and the global economy.

Demand for the dollar continued to be underpinned after the yield on 10-year U.S. Treasury notes rose above the psychologically important 3% level to the highest level in two weeks as a rally in oil prices boosted inflation expectations.

A rise above the high of 3.035% reached on April 25 would take it to its highest since early 2014.

The dollar held gains against the yen, with USD/JPY last up 0.55% to 109.72.

The euro pulled away from four month lows against the dollar, with EUR/USD inching up to 1.1874 after hitting an overnight low of 1.1823.

The single currency has come under pressure in recent sessions after a soft patch of economic data fueled speculation that the European Central Bank may not be able to end its asset purchasing stimulus program in September, as some investors had expected.

The pound also gained ground, with GBP/USD rising 0.18% to 1.3571 after plumbing a four month low of 1.3483 on Tuesday.

The pound has fallen sharply in recent weeks as investors slashed expectations for a rate hike by the Bank of England this week amid indications that the economy is weakening.

A report earlier on Wednesday showed that retail spending in the UK fell 3.1% year-on-year in April, adding to recent downbeat data.

Elsewhere, the Australian dollar recovered from eleven month lows, with AUD/USD last at 0.7455, while the New Zealand dollar moved back from mid-December lows, with NZD/USD advancing 0.27% to 0.6987.

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