Investing.com - The U.S. dollar edged back towards the strongest level since December 2002 against a basket of other major currencies on Tuesday, after data showed U.S. consumer confidence in December improved to the highest level since August 2001.
The Conference Board said its consumer confidence index jumped to 113.7 this month from a reading of 109.4 in November. Analysts expected the index to fall to 109.0 in December.
The upbeat data boosted optimism over the health of the economy and supported the case for higher interest rates in the months ahead.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.1% at 103.05 by 10:25AM ET (15:25GMT), not far from last week's 14-year peak of 103.62.
Against the yen, the dollar was up 0.4% at 117.55, compared to a 10-1/2 month high of 118.65 set last week.
The yen showed little reaction to Japan's inflation data, which saw core consumer prices fall for the ninth straight month in November.
Meanwhile, the euro was little changed against the greenback at 1.0454, hovering above last week's 13-year low of 1.0352.
Investors contemplated the future of Banca Monte dei Paschi di Siena after the European Central Bank told the embattled Italian lender that it needs to plug an €8.8 billion ($9.2 billion) capital shortfall, higher than a previous €5 billion gap estimated by the bank.
Elsewhere, the British pound dipped 0.2% to 1.2256 against the dollar, within sight of a seven-week low of 1.2229 touched late last week, amid renewed uncertainty over the process by which Britain will leave the European Union.
Since the U.S. election in early November, the dollar has rallied by almost 6% thanks to bets of higher U.S. growth and a faster pace of interest rate increases under incoming president Donald Trump.
The Federal Reserve hiked interest rates for the first time in a year earlier this month and projected three more increases in 2017. In contrast, central banks in Europe and Japan remain committed to very loose monetary policies
Higher rates boost the dollar by making the currency more attractive to yield-seeking investors.