Investing.com - The U.S. dollar held steady near a two-week high against its major peers in early European hours on Wednesday, while the Australian dollar sank to its lowest level of the year after data showed the economy slowed to a near standstill in the fourth quarter.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was at 96.80 by 4:15AM ET (09:15 GMT), after going as high as 96.95 the previous day, its best level since Feb. 15.
Robust U.S. economic data supported the dollar after reports on Tuesday showed a rebound in housing and services activity, which eased concerns over a slowdown in the world’s biggest economy.
The dollar was a tad lower against the yen at 111.85 (USD/JPY), after hitting a high of 112.13 a day earlier, its strongest since Dec. 20.
Elsewhere, the Australian dollar fell almost 0.8% against its U.S. counterpart to reach the lowest level since Jan. 4 after data showed the economy grew 0.2% in the fourth quarter, below an expected 0.5% increase.
The disappointing data reinforced recent evidence of slowing domestic momentum and encouraged market expectations for a rate cut from the Reserve Bank of Australia this year.
Meanwhile, the euro was little changed against the dollar at $1.1301, hovering near two-week lows amid expectations the European Central Bank would indicate a delay in raising rates until next year and will soon re-launch long-term bank loans to fight an economic slowdown at its meeting on Thursday.
“The rates market has really pared back its view on future ECB rate hikes, which is fair given the negative trend in the data flow,” said Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone.
Among other G10 currencies, the Canadian dollar traded near its lowest in nearly six weeks, as investors looked ahead to a policy decision by the Bank of Canada (BoC) later in the day.
The BoC is expected to leave domestic borrowing costs unchanged, though some traders expect it might lower rates later this year.
-- Reuters contributed to this report