NEW YORK (Reuters) - The dollar rose to a two-week peak against a basket of currencies on Tuesday as unexpectedly strong data on U.S. services industries and new home sales allayed some worries about the state of the world’s largest economy.
The euro weakened to two-week lows versus the greenback on expectations that the European Central Bank meeting on Thursday would hint at a delay in raising rates until next year and soon relaunch long-term bank loans to battle an economic slowdown.
Among other G10 currencies, the Canadian dollar fell to its lowest in over five weeks due to a combination of trade troubles, resignations from Prime Minister Justin Trudeau’s cabinet and bets the Bank of Canada could be on the cusp of changing its policy direction.
“We are still seeing pretty solid data, which are keeping the dollar supported here,” said Eric Viloria, currency strategist at Credit Agricole in New York.
Earlier on Tuesday, the U.S. Commerce Department said new single-family home sales increased to a seven-month high in December, while the Institute for Supply Management said its gauge on services sector activity rose more than expected last month.
An index that tracks the dollar against the euro, yen, sterling and three other major currencies increased 0.17 percent to 96.895 in late U.S. trading. It earlier touched a two-week high of 97.008.
The euro fell to a two-week trough of $1.12895. It was last down 0.32 percent to $1.1304.
“The ECB’s new projections on Thursday might paint a more subdued picture than before,” said Commerzbank FX analyst Antje Praefcke, adding the euro appeared to be “aiming for the $1.13 mark.”
Investors are seeking out higher-yielding currencies as price volatility in the world’s most-traded currencies has plummeted following a dovish shift by major central banks.
The Bank of Canada is expected to leave domestic borrowing costs unchanged at its policy meeting on Wednesday. Some traders expect it might lower rates later this year.
The Canadian currency was 0.32 percent weaker at C$1.3346. It hit C$1.336 earlier on Tuesday, which was its lowest against the greenback since Jan. 25.
Meanwhile, the Australian dollar rose briefly after the Reserve Bank of Australia left key rates unchanged earlier Tuesday and policy-makers clung to an optimistic outlook on the economy.
The Aussie dollar retreated in U.S. trading from its earlier session peaks, down 0.08 percent on the day at $0.7086.
GRAPHIC-Canada dollar weakens (tmsnrt.rs/2C5KNr7)
Additional reporting by Tom Finn in London, Sujata Rao and Shinichi Saoshiro in Tokyo; editing by Kevin Liffey, G Crosse and Chizu Nomiyama