Investing.com - The dollar trimmed gains against the other major currencies on Wednesday, but remained supported as the release of strong U.S. data on capital goods orders added to optimism over the strength of the economy.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.66% at 94.56, after rising to 95.02 earlier in the session.
The dollar was higher against the yen, with USD/JPY up 0.16% to 119.14.
Expectations for a U.S. rate hike were revived after data on Wednesday showed that core capital goods orders, a closely watched proxy for business spending, rose 2.2% last month, the biggest increase since June last year.
Total durable goods orders increased 2.0% last month, compared to expectations for a decline of 0.4%.
Market sentiment had received a boost earlier in the day after China’s central bank injected 140 billion yuan into the money market to avoid a liquidity crunch.
The People’s Bank of China announced plans for cheap loans to lenders, who have suffered after an increase in capital outflows following the devaluation of the yuan earlier this month.
The move came after the Shanghai stock market fell again on Wednesday, as Tuesday's interest rate cut failed to alleviate fears over the slowing economy.
The dollar was also higher against the euro, with EUR/USD dropping 0.78% to 1.1425.
The single currency moved lower after European Central Bank Executive Board member Peter Praet said Wednesday that lower commodity prices and signs of economic weakness mean there is an increased risk that the euro area will miss its short-term inflation targets.
He also indicated that the ECB is prepared to scale up its asset purchase program, known as quantitative easing, if necessary.
The dollar was higher against the pound and the Swiss franc, with GBP/USD down 0.82% at 1.5560 and with USD/CHF advancing 0.60% to 0.9450.
The Australian and New Zealand dollars turned lower, with AUD/USD down 0.18% at 0.7118 and with NZD/USD shedding 0.27% to 0.6455.
Meanwhile, USD/CAD was down 0.23% to 1.3307, extending its pullback from Tuesday's 11-year high of 1.3298.