The dollar weakened against a basket of the other major currencies on Thursday after Federal Reserve meeting minutes that pointed to uncertainty over the possible impact of the incoming Trump administration on the U.S. economy.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.55% at three-week low of 101.93.
The index hit highs of 103.81 on Tuesday, the most since December 2002, as strong U.S. factory data fed into expectations for a faster pace of monetary tightening in 2017.
The minutes from the Fed’s December 13-14 meeting showed that officials “emphasized their considerable uncertainty” over the policy direction of President-elect Donald Trump’s incoming administration.
Trump will take office on January 20 and has yet to outline his economic policies in detail.
The minutes also showed that policymakers assumed that Trump’s promises to cut taxes and ramp up infrastructure spending could, if delivered, spur inflation which would in turn lead to a faster pace of rate increases this year.
The euro moved higher, with EUR/USD rising 0.41% to 1.0530, extending its recovery from the 14-year trough of 1.0339 set on Monday.
The dollar was sharply lower against the yen, with USD/JPY falling 0.9% to 116.18.
Elsewhere sterling was weaker, with GBP/USD down 0.22% at 1.2293 ahead of a report on the U.K. service sector, which was expected to show that activity eased slightly in December.
The Australian dollar touched two-week highs after data showing that activity in China’s services sector rose to a 17-month high last month.
AUD/USD hit highs of 0.7330 immediately following the report, before pulling back to 0.7296.