SYDNEY The U.S. dollar continued to give back a bit of its recent hefty gains on Tuesday in a market lacking conviction with many investors having already closed their books for the year.
The dollar last traded at 104.19 yen, struggling to make any headway after peaking at a five-year high of 104.64 on Friday. The very slim 103.77/104.125 range on Monday showed clearly how torpid the market was.
The euro bought $1.3695, holding off a two-week low of $1.3625 plumbed Friday. Against the yen, the common currency stood at 142.63, not far from a five-year high of 142.90 set last week.
Traders said the market was always going to struggle to find fresh stimulus following last week's Federal Reserve meeting, which was effectively the final major risk event of 2013.
But some believe the Fed's decision to start scaling back its bond-buying stimulus, combined with rising Treasury yields, should continue to underpin the greenback.
Markets are now looking to see if the U.S. economy will be strong enough to allow the Fed to continue withdrawing support through 2014.
"So far, the conclusion seems to be that the Fed is likely to continue to wind down asset purchases, and this should provide underlying support for the USD," analysts at BNP Paribas wrote in a note to clients.
Data on Monday provided some optimism the world's biggest economy is firmly on the recovery path with inflation benign.
Consumer spending rose in November at the fastest pace since June, while a survey showed consumer sentiment hit a five-month high heading into the end of the year.
The lack of dollar momentum for now has allowed commodity currencies like the Australian and Canadian dollars to bounce off 3-1/2 year troughs.
The Aussie was last at $0.8932, off last week's low of $0.8820, while the Canadian dollar traded at C$1.0614 per USD versus C$1.0737.
Traders expect little action until full market liquidity returns early next year. Most financial markets across the globe will be shut on Wednesday for Christmas Day and many will stay closed on Thursday.
Worries about a cash crunch in China appeared to have taken a back seat after the central bank last week injected 300 billion yuan ($49.41 billion) into the money market.
Traders, however, will no doubt be keeping a close eye on any fresh developments there in the year-end lull.
(Editing by Wayne Cole)