The dollar held steady on Friday, lingering about half a percent below a 14-year peak set earlier this week, as traders moved to the sidelines ahead of the Christmas holiday weekend.
The greenback will likely test fresh multi-year heights when investors return from their year-end holiday break. The dollar has rallied more than 5 percent against a basket of currencies since Donald Trump’s surprise U.S. presidential election win on Nov. 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 U.S. new home sales and consumer sentiment data, which reinforced the view the world’s biggest economy is expanding faster than its European and Japanese counterparts.
Bets that Trump’s economic policies would promote faster U.S. growth and inflation have fed appetite for the dollar, stocks and corporate bonds and stoked selling in the yen, gold and U.S. Treasuries.
Federal Reserve’s hint that it might raise U.S. interest rates at a faster pace in 2017, together with European Central Bank and Bank of Japan maintaining their ultra-loose policy stance, have further bolstered the dollar in recent days.
The dollar index was marginally firmer at 103.03, recovering from an earlier low of 102.89. It was not far from the 14-year peak of 103.65 reached on Tuesday.
The euro was little changed 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 settled with the U.S. Department of Justice over claims they misled investors when selling mortgage-backed securities.
The common currency was flat at $1.0439, 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 0.14 percent against the euro and the dollar at 122.47 yen and 117.37 yen, respectively.
The yen has recovered somewhat from its 10-1/2-month low against the dollar this week on lower U.S. Treasury yields and safe-haven bids stemming from attacks in Ankara and Berlin, analysts said.
U.S. two-year Treasury yield was 1.197 percent, little changed on the day, while U.S. 10-year yield was down 1 basis point from Thursday at 2.537 percent.