Investing.com - The dollar pulled back from Friday’s three-month highs against a basket of the other major currencies on Monday, while the euro edged higher after falling to the lowest levels since July on Friday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.16% to 94.58 by 04:30 AM ET (08:30 AM GMT), off Friday’s three month high of 95.06.
The euro pushed higher, with EUR/USD rising 0.22% to 1.1632 after falling as low as 1.1573 on Friday and losing 1.48% for the week, its worst week since March.
The euro remained under pressure amid ongoing unrest in Spain’s Catalonia.
Spain's Prime Minister Mariano Rajoy assumed direct control of the region on Friday and called for a snap election on Dec. 21 following its unilateral declaration of independence from Spain.
The euro was also pressured lower after the European Central Bank said late last week it is extending its bond purchases into September 2018 while reducing monthly bond purchases by half to €30 billion per month from January. The move led investors to push back expectations for rate hikes to 2019.
The dollar was little changed against the yen, with USD/JPY at 113.69.
Demand for the dollar continued to be underpinned after data on Friday showed that the U.S. economy grew at a 3% annual rate in the third quarter, better than forecasts for growth of 2.5%.
The stronger-than-expected reading underlined the case for the Federal Reserve to raise interest rates at a faster pace in the coming months. Higher rates tend to make the dollar more attractive to yield seeking investors.
The Fed is to hold a two-day policy meeting on Tuesday and Wednesday at which it is expected to keep rates on hold.
The dollar had already received a boost last week after House Republicans passed a budget blueprint for 2018, setting the stage for a tax overhaul. Some investors believe tax reforms could bolster growth and prompt the Fed to raise rates at a faster pace.
Meanwhile, speculation over who will be the next Fed head continued following reports on Friday that President Donald Trump is considering nominating Fed Governor Jerome Powell to lead the U.S. central bank, a move that would signal continuity for monetary policy.
Powell is seen less hawkish than Stanford University economist John Taylor, another potential nominee to lead the Fed.
Sterling also pushed higher against the dollar, with GBP/USD rising 0.24% to 1.3162.