The U.S. dollar hit a 1-1/2-week low against the safe-haven yen on Tuesday after traders booked profits from recent multi-year highs in the greenback and parked their winnings in the Japanese currency.
The dollar, which hit fresh nearly nine-year highs against a basket of major currencies early Tuesday, surrendered some of those gains and hit a low against the yen of 118.87 yen as traders closed out profitable dollar bets. The dollar has risen over 12 percent this year against major currencies.
The euro also fell against the yen, and was last down 0.91 percent against the Japanese currency at 145.26 yen after hitting a nearly 1-1/2-month low of 144.77 yen EURJPY=.
“People are coming into the year end and taking off some pretty profitable stuff,” said Lane Newman, director of foreign exchange at ING Capital Markets in New York. He specifically cited profit-taking from bullish dollar bets.
Analysts noted that the dollar remained close to recent highs. The euro hit a 29-month low against the dollar of $ 1.2123 earlier in the session, while the dollar hit a fresh 29-month high against the Swiss franc of 0.9920 franc.
The euro was weak against the yen and erased early gains against the dollar on growing expectations that the European Central Bank will bolster its monetary stimulus by announcing outright purchases of government bonds, potentially at its next meeting on Jan. 22. That move is expected to weaken the euro.
“In January, the odds of quantitative easing or further easing are pretty significant,” said Sebastien Galy, senior foreign exchange analyst at Societe Generale in New York.
Activity was thin ahead of the New Year holiday. Japanese markets will be shut from Wednesday to Friday and will reopen next Monday.
The dollar was last down 0.94 percent against the yen JPY= at 119.54 yen. The euro EUR= was last flat against the dollar at $ 1.2151. The dollar was last down 0.06 percent against the Swiss franc CHF= at 0.9893 franc.
The U.S. dollar index .DXY, which measures the greenback against a basket of six major currencies, was last down 0.22 percent at 89.989. Sterling GBP= was last up 0.27 percent against the dollar at $ 1.5553.
On Wall Street, the benchmark S&P 500 .SPX stock index was last down 0.40 percent, while benchmark 10-year Treasury yields US10YT=RR were last at 2.19 percent after earlier hitting a one-week low of 2.17 percent.
(Reporting by Sam Forgione; Editing by Christian Plumb and Cynthia Osterman)