The dollar slipped against a basket of major currencies on Thursday, as its rally from a three-year low last week ran out of steam, and the yen soared as heightened volatility led investors to favour the Japanese currency. The dollar index, which measures the greenback against a basket of six major currencies, was down 0.22 percent at 89.805. Through Wednesday, the index gained nearly 2 percent since hitting a three-year low of 88.253 on Friday.
"The dollar has firmed up over the last week against basically all the currencies. And then we had another push yesterday," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
The index finished 0.3 percent higher on Wednesday after minutes of the Federal Reserve's January meeting showed policymakers were more confident of the need to keep raising interest rates.
"You could argue that a lot of the good news is out there and it's not a bad time to take the opportunity from the minutes to reposition yourself," said Trang. "You are seeing a little bit of that today," he said. The dollar slipped 0.8 percent against the yen to 106.9 yen, as increased volatility across markets sent traders looking for a safe haven.
The yen tends to benefit during times of heightened volatility as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis materialize. "It kind of makes sense, when you see this much volatility, that people are just looking for a place that will have a little bit more stability," said Trang. The euro was 0.32 percent higher against the greenback at $1.2321.
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