Dollar retreats against euro, yen

The dollar continued along its downward trajectory this week as investors cashed in on the U.S. currency’s gains in 2015 and few added significant positions ahead of the holiday break.

The dollar USDEUR, -0.1217% declined against the euro on Thursday, as the common currency changed hands for $1.0972, compared with $1.0913 late Thursday. The dollar slid versus the yen USDJPY, -0.14% to ¥120.28, from ¥120.92.

Financial markets around the world closed early on Christmas Eve.

The Wall Street Journal Dollar Index BUXX, +0.01% which compares the greenback against a basket of 16 commonly traded currencies, declined 0.4% to 89.64 on Thursday.

Many money managers have closed their books after a year when the dollar appreciated 8.4% against peers. Throughout 2015, many investors bet heavily that the dollar would rise in anticipation of the Federal Reserve raising its short-term, benchmark interest rate for the first time since 2006, a move that would lure yield-hungry investors to assets denominated in the U.S. currency.

Investors also wagered against currencies such as the euro and the yen, as central banks in the eurozone and Japan engaged in polices designed to boost inflation and growth. But the dollar’s rally sputtered throughout much of the year as an uncertain global economic backdrop weighed on the U.S. economy and discouraged the Fed from moving on interest rates.

The greenback rose after the Fed raised interest rates last week, setting investors up to close positions amid gains and prepare for 2016.

U.S. economic numbers will set the tone for the greenback over the coming year, as they’ll likely signal the appropriate pace of policy tightening for the Fed, said Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange, Inc.

“With little appetite to put on any new positions ahead of the New Year, the dollar is likely to drift around current ranges,” he says. “Still, most analysts see further upside for the dollar next year, albeit less so than was priced in for 2015.”

Source: Market Watch