The dollar edged up against the euro on Tuesday on profit-taking after sliding to a 20-month low in the previous session on stagnating interest rates in the United States and rising yields in the euro zone.
The euro also pulled back after scaling another record high versus the yen as euro zone finance ministers meeting in Brussels suggested they were not overly concerned about the single currency's strength.
After initially slipping against the euro and the yen, the dollar pared its losses in the afternoon on position unwinding, said a trader for a major Japanese trading house. "I think hedge funds may be locking in their profits," he said. Market sentiment was still seen favouring the euro against the dollar, although some traders said that could quickly change depending on how a bevy of US economic indicators due this week pans out.
"For the time being the market is not cautious about staying bullish in the euro," said the chief trader at a European investment bank in Tokyo. "But the dollar weakness trend isn't that strong. It could be neutralised with two sets of positive US figures." Bank of Japan Governor Toshihiko Fukui offered no fresh clues on when the BoJ may raise interest rates, saying it would boost rates "not too early or too late", and traders said his comments had little impact on the market.
The euro inched down to $1.3125 from around $1.3135 in late US trading on Monday, when it hit a 20-month high of $1.3180 on electronic trading platform EBS. Since the dollar began to slide last Wednesday the euro has gained over 2 percent, taking its gains for the year to around 11 percent.
Against the low-yielding Japanese currency, the euro was at 152.40 yen, hovering below the record-high 152.55 yen marked earlier in the session. While racking up a succession of new highs, the euro has risen 9 percent against the yen since the start of the year. The dollar was little changed at 116.15 yen, off a three-month low of 115.40 yen marked on EBS a day earlier.
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