U.S. dollar holds near 14-year highs as rally loses steam

NEW YORK (Reuters) - The U.S. dollar edged lower against a basket of major currencies on Friday, but still held near 14-year highs touched after Wednesday’s Federal Reserve meeting, with profit-taking halting the greenback’s rally.

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The dollar index .DXY, which measures the greenback against a basket of six major rivals, was last at 102.900, not far from Thursday's 14-year high of 103.560 but down 0.12 percent on the day.

The index gained 1.2 percent on Thursday to mark its biggest daily percentage gain in nearly six months a day after the U.S. central bank raised interest rates for the first time in a year. The Fed also signaled it was likely to hike rates three more times in 2017, up from the two increases forecast at the central bank’s September meeting.

The projections, combined with expectations that U.S. President-elect Donald Trump’s incoming administration may boost domestic economic growth with fiscal stimulus, sent the dollar shooting higher and brought parity with the euro back in play.

Profit-taking ahead of the weekend and expectations of a squeeze on dollar liquidity heading into year-end dampened the dollar’s gains on Friday, analysts said.

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“The scale of the move since the FOMC meeting has been significant, and you would expect to see some kind of profit-taking on dollar longs,” said David Gilmore, partner at FX Analytics in Essex, Connecticut.

The euro was last up 0.2 percent against the dollar at $1.0433 after hitting a nearly 14-year low of $1.0364 on Thursday, with the current level putting it about 4 percent away from parity with the dollar. The dollar was down 0.2 percent against the yen at 117.94 yen after hitting a roughly 10-1/2 month high of 118.66 yen on Thursday.

Despite Friday’s losses, the dollar remained on track to notch its biggest weekly percentage gains against the euro, yen, and Swiss franc in four weeks. The euro was on track to decline 1.2 percent against the dollar, while the dollar was set to gain 2.2 percent against the yen and about 1 percent against the Swiss franc for the week.

“We’re probably starting to thin out for the holidays as well,” said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York.

Against the Swiss franc, the dollar was last down 0.3 percent at 1.0268 francs after touching 1.0344 francs on Thursday, its highest since August 2010.

Reporting by Sam Forgione; Additional reporting by Patrick Graham in London; Editing by Chizu Nomiyama and Meredith Mazzilli