The dollar hovered near a two-month high against a basket of currencies on Wednesday, lifted by hawkish comments from a Federal Reserve official and higher US Treasury yields. The euro also extended its bounce following a report of potential changes to European Central Bank policy. But the pound marked fresh, three-decade lows amid concerns that Britain's separation from the European Union could be rocky and have grave economic consequences.
The dollar index stood at 95.989, in sight of 96.442, its highest since August 9. The greenback was already on a strong footing after rallying at the start of the week on an upbeat survey of the US manufacturing sector. It got an additional lift after Richmond Federal Reserve President Jeffrey Lacker said on Tuesday there was a strong case for raising interest rates and as Treasury yields rose to two-week highs in response to a surge by their euro zone counterparts.
The euro rose 0.2 percent to $1.1222, extending the bounce from the previous day when it swung widely on speculation over ECB monetary policy. The common currency had slid on Tuesday to a low $1.1138 against the bullish dollar before climbing back to a peak $1.1239. It climbed along with a rise in euro zone debt yields in response to a Bloomberg report of a ECB plan to taper its asset-purchase programme.
An ECB media officer tweeted later on Tuesday, however, that the central bank's decision-making body has not discussed reducing the pace of its monthly bond buying. "It remains to be seen if the report can be substantiated. But the mood in the market appears to have shifted with the mention of ECB tapering as it would spell an end to monetary policy divergence," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
The euro had been kept relatively weak against the dollar as the ECB has been easing extensively while the Fed was poised to raise rates. The dollar was little changed at 102.880 yen after rising to a three-week high of 102.965 overnight, when it posted its sixth straight day of gains versus its Japanese peer.
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