Investing.com - The U.S. dollar edged slightly higher against the other major currencies after the long Christmas weekend on Tuesday, holding near the strongest level since December 2002 as the market entered the last trading stretch of the year.
Trading activity was likely to stay subdued as many investors already closed books before the end of the year, reducing liquidity in the market.
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 3:40AM ET (08:40GMT), not far from last week's 14-year peak of 103.62.
Against the yen, the dollar was up 0.15% at 117.25, 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 dipped 0.1% to against the greenback to 1.0450, hovering above last week's 13-year low of 1.0352.
Investors will be eyeing 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 was steady at around 1.2270 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.
The greenback remained well-supported thanks to bets of higher U.S. growth and a faster pace of interest rate increases under incoming president Donald Trump.
Since the U.S. election in early November, the dollar has rallied by almost 6%.
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.
The U.S. Conference Board is to publish data on December consumer confidence at 10:00AM ET (15:00GMT) Tuesday, with market players expecting the index to rise to 108.5 from 107.1 a month earlier.
If confirmed it would be the strongest reading since July 2007, fueling optimism over the health of the economy and supporting expectations of higher interest rates in the months ahead.