The euro pushed higher against the dollar on Tuesday as uncertainty over when the Federal Reserve will start to taper its stimulus program continued to weigh on the dollar.
EUR/USD eased up 0.10% to 1.3774, close to the two year highs of 1.3831 struck on October 25.
The pair was likely to find support at 1.3726, Monday’s low and near-term resistance at 1.3809.
Investors remained cautious ahead of the outcome of the Fed’s two-day policy meeting on Wednesday, with some expecting the bank to announce a small reduction in the pace of its USD85 billion-a-month asset purchase program.
Markets were turning their attention to U.S. inflation data due out later in the session amid concerns that the subdued inflation outlook could prompt the Fed to keep its stimulus program in place for longer.
Demand for the euro continued to be underpinned after data on Monday showed that the euro area’s composite purchasing managers’ index rose to a three month high in November, indicating that European Central Bank policymakers will not need to step up stimulus measures.
Manufacturing activity in Germany rose to a 30 month high but the contraction in France deepened in November, sparking concerns that the country could fall back into a recession.
The euro was not far from five year peaks against the yen, with EUR/JPY edging up 0.08% to 141.85.
Elsewhere, the dollar edged lower against the yen, with USD/JPY dipping 0.05% to 102.96, down from Friday’s five year highs of 103.91.
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