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US Dollar Index Gains as Euro, Pound Edge Lower

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US Dollar Index Gains as Euro, Pound Edge Lower

The US dollar index strengthened for a third consecutive session as the euro and British pound continued to slide.

The gauge of US dollar activity rose more than 0.1 percent to 80.76, despite a relatively mixed performance across the board.

The greenback edged higher against the British pound, which was unable to translate strong economic data into meaningful gains. The GBPUSD pair was trading on a loss of 16 pips in the mid-day North American session, after falling below the 1.64 handle. Meanwhile, the euro fell 62 pips to 1.3601 US, as disappointing Chinese service data dampened market sentiment. China’s service economy expanded at a slower pace in December, a sign the world’s second-largest economy was losing momentum at the end of 2013.

The dollar was unable to extend its gains beyond Europe, as the commodity peers unexpectedly strengthened. After failing to breach the 1.0675 CAD zone, the greenback fell 57 pips to 1.0610 against the Canadian dollar. Down-under, the Australian dollar hit a fresh three-week high, underpinned by stronger risk sentiment. The AUDUSD pair attempted a re-test of 0.90 before consolidating at 0.8981, a gain of 77 pips.

The dollar fell to multi-week lows against the Japanese yen, but still remained within striking distance of five year highs. The USDJPY pair fell more than 0.3 percent to 104.45.

Upbeat economic data will continue to drive the US dollar, which is expected to strengthen now that the Federal Reserve has tapered bond purchases. The Labor Department will report on December nonfarm payrolls at the end of next week, and is expected to show the US economy added 194,000 private sector jobs last month. Stronger than forecasted job gains over the past two months gave the Fed the impetus to begin tapering asset purchases by $10 billion in January.

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