The dollar held steady on Friday in a tight trading range, as traders moved to the sidelines ahead of the Christmas holiday weekend, leaving the greenback about half a percent below a 14-year peak set earlier this week. The dollar will likely resume its recent rally when the new year begins. It has gained 5 percent against a basket of currencies since Donald Trump's US presidential victory on November 8.
"No one wants to take additional risk between now and the end of the year. They don't want to jeopardize those gains," said Stan Shipley, strategist at Evercore ISI in New York. Traders brushed off upbeat data on US new home sales and consumer sentiment, which reinforced views that the world's biggest economy is expanding at a steady clip.
Bets that Trump's economic policies would promote faster US growth and inflation have fed appetite for the dollar, stocks and corporate bonds, while stoking selling in traditional safe havens the yen, gold and US Treasuries. The Federal Reserve's hint that it might raise US interest rates at a faster pace in 2017, along with the European Central Bank and Bank of Japan's maintaining their ultra-loose policy stance, has also bolstered the dollar in recent days.
The dollar index was marginally softer at 103.04 after trading in a 0.34 point range, and not far from the 14-year peak of 103.65 reached on Tuesday. The euro was steady after the Italian government approved a rescue package for Monte dei Paschi di Siena after the world's oldest bank failed to raise needed capital from investors.
Worries about the European bank sector also diminished after Credit Suisse and Deutsche Bank agreed to settle with the US Department of Justice over claims they misled investors when selling mortgage-backed securities. The euro was up 0.1 percent at $1.0446, holding above a nearly 14-year low of $1.0350 set earlier in the week. With Japan markets closed for a holiday, the yen edged up 0.1 percent against the euro at 122.45 yen and up 0.2 percent versus the dollar at 117.26 yen.
"For the yen, there's a bit of consolidation after its recent weakening," said Paul Christopher, head global market strategist at Wells Fargo Investment Institute in St. Louis, Missouri. The yen recovered somewhat after hitting a 10-1/2-month low against the dollar this week, helped by lower US yields and safe-haven bids stemming from the attacks in Ankara and Berlin, analysts said. The benchmark US 10-year Treasury yield was down 1 basis point from Thursday, at 2.543 percent.