Investing.com - The dollar trimmed gains against the other main currencies on Tuesday after the International Monetary Fund raised its forecast for global economic growth, but expectations for further cuts to the Federal Reserve’s stimulus program continued to support dollar demand.
USD/JPY was up 0.11% to 104.28, after rising as high as 104.75 earlier.
In revisions to its World Economic Outlook report published on Tuesday the IMF said it expects the global economy to grow by 3.7% in 2014, which in October it said would expand by 3.6%.
Demand for the dollar continued to be underpinned by expectations for a reduction in the Fed’s quantitative easing program at the outcome of its next policy meeting on January 29 to USD65 billion from the current USD75 billion.
EUR/USD touched session lows of 1.3516, and was last down 0.10% to 1.3539.
The euro found support after the IMF said it expects the euro zone economy to expand by 1% this year, saying “the euro area is turning a corner from recession to recovery."
The euro slipped to session lows earlier after a report showed that the ZEW index of German economic sentiment ticked down to 61.7 this month from 62.0 in December. Analysts had expected an increase to 64.0.
The current conditions index rose to a 20-month high of 41.2 from 32.4 in December, beating expectations for an increase to 34.1.
The dollar moved lower against the pound, with GBP/USD rising 0.21% to 1.6461.
Sterling was boosted after the IMF upgraded Britain’s growth forecast to 2.4% in 2014 from 1.9% in October, more than any other country, while its forecast for growth in 2015 was raised to 2.2%.
The dollar remained higher against the Swiss franc, with USD/CHF up 0.20% to 0.9117.
The Australian dollar was trading close to three-and-a-half year lows, with AUD/USD down 0.14% to 0.8798. Meanwhile, NZD/USD was down 0.16% to 0.8312, after rising as high as 0.8340 earlier.
The kiwi initially gained ground after data released on Tuesday showed that New Zealand’s inflation rate rose 0.1% in the fourth quarter and 1.6% on a year-over-year basis. Market expectations were for a 0.1% drop on the quarter and gain of 1.5% on the year.
Meanwhile, USD/CAD was up 0.23% to 1.0973, after rising to 1.1019 earlier in the session, the highest level since September 2009. The loonie, as the Canadian dollar is also known, remained under pressure amid expectations that the Bank of Canada will stick to its dovish stance on rates at Wednesday’s policy meeting.
Also Tuesday, the dollar rose to record highs against the Turkish lira after the country’s central bank left interest rates unchanged at 4.5%. The decision came amid escalating concerns over the lira’s recent sharp depreciation and worsening inflation expectations.
USD/TRY rose to highs of 2.2694 and was last up 0.78% to 2.2574.
The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.10% to 81.31.
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