The U.S. dollar dipped against major currencies on Tuesday after traders booked profits from recent multi-year highs in the greenback, while the safe-haven yen benefited from the move.
The dollar, which hit fresh nearly nine-year highs against a basket of major currencies early Tuesday, surrendered some of those gains and hit a 1-1/2-week low against the yen of 118.87 yen as traders closed out profitable dollar bets.
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The euro also fell against the yen, and was last down over 1 percent against the Japanese currency after hitting a nearly 1-1/2-month low of 144.77 yen.
"From the macroeconomic perspective, there isn't any new development to argue for dollar weakness, so I think it has to be mostly related to positioning ahead of year end," said Martin Schwerdtfeger, a foreign exchange strategist at TD Securities in Toronto.
He noted that the dollar was not far from its recent highs and said Tuesday's move was likely to prove short-lived. The euro hit a 29-month low against the dollar of $1.2123 earlier in the session, while the dollar hit a fresh 29-month high against the Swiss franc of 0.9920 franc.
"The stronger dollar story remains very much in place," Schwerdtfeger said. He said the profits that traders were reaping from dollar bets were likely being temporarily funneled into the safe-haven yen.
Analysts have said that the dollar, which has risen over 12 percent this year against a basket of major currencies, could rally into 2015 on the divergence between the U.S. Federal Reserve's tilt toward tighter monetary policy and looser policies in Europe, Japan, and Switzerland.
Activity remained thin ahead of the New Year holiday. Japanese markets will be shut from Wednesday to Friday and will reopen next Monday.
The dollar was last down 1.29 percent against the yen at 119.12 yen. The euro was last up 0.18 percent against the dollar at $1.2172. The dollar was last down 0.11 percent against the Swiss franc at 0.9886 franc.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last down 0.32 percent at 89.900. Sterling was last up 0.26 percent against the dollar at $1.5553.
U.S. stock indexes pulled back from record levels, while Treasury yields fell. The benchmark S&P 500 stock index was last down 0.29 percent, while benchmark 10-year Treasury yields were last at 2.17 percent, not far from a one-week low touched earlier in the session. (Reporting by Sam Forgione; Editing by Christian Plumb)