The greenback moved higher against most major currencies on Wednesday after better-than-expected U.S. economic indicators and an upbeat take on the economy from the Federal Reserve fueled expectation for monetary stimulus programs to continue unwinding this year.
In U.S. trading on Wednesday, EUR/USD was down 0.56% at 1.3602.
The dollar firmed against the euro and most other major currencies after data revealed that manufacturing activity in the New York State expanded at the fastest pace since May 2012 this month.
The Federal Reserve Bank of New York said that its general business conditions index jumped to 12.51 in January from an upwardly revised 2.22 in December. Analysts were expecting the index to rise to only 3.75.
Elsewhere, U.S. wholesale prices beat expectations and firmed the dollar further.
The U.S. producer price index rose 0.4% in December, the biggest increase since June, recovering from a 0.1% decline in November and was 1.2% higher from a year earlier.
Core PPI was up 0.3% in December and rose 1.4% on a year-over year basis, compared to expectations for a monthly increase of 0.1% and an annual gain of 1.3%.
The solid data convinced investors that the Federal Reserve will continue winding down its USD75 billion in monthly bond purchases in the coming months.
Bond purchases weaken the dollar by driving down long-term interest rates, and talk of their dismantling tends to strengthen the greenback.
Wednesday''s economic indicators were the latest convincing investors that the poor December jobs report was likely a hiccup on the road to recovery.
On Tuesday, the Commerce Department reported that U.S. retail sales rose 0.2% in December, beating expectations for a 0.1% increase.
Core retail sales, which exclude automobile sales, expanded by 0.7% in December, well above forecasts for a 0.4% increase.
The figure convinced investors to look past data revealing the U.S. economy added 74,000 jobs in December, well below expectations for a 196,000 increase.
Also giving the dollar support, the Federal Reserve released its Beige Book earlier, which said the U.S. economy continues to expand at a moderate pace.
Meanwhile in Europe, data revealed the euro zone’s trade surplus widened to EUR16.0 billion in November from a surplus of EUR14.3 billion in October, largely due to a decline in imports. Analysts had expected the trade surplus to widen to EUR16.7 billion.
Elsewhere, Germany’s Federal Statistics Office reported earlier the economy expanded by just 0.4% in 2013 after increasing by 0.7% in 2012, as the crisis in the euro zone acted as a drag on growth. Analysts had been expecting growth of 0.5%.
The greenback was up against the pound, with GBP/USD down 0.41% at 1.6373.
The dollar was up against the yen, with USD/JPY up 0.41% at 104.64, and up against the Swiss franc, with USD/CHF up 0.68% at 0.9088.
The dollar was higher against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.01% at 1.0951, AUD/USD down 0.61% at 0.8910 and NZD/USD down 0.55% at 0.8336.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.51% at 81.15.
On Thursday, the U.S. is to publish reports on consumer price inflation and initial jobless claims, in addition to data on manufacturing activity in Philadelphia. Meanwhile, Federal Reserve Chairman Ben Bernanke is to speak at an event in Washington.