Investing.com - The euro fell to a new 13-year low on Tuesday, while the dollar rose to its highest level since 2002, as traders began to unwind positions in the run-up to the Christmas weekend.
The euro was down 0.42% at 1.0358 against the dollar by 7:50AM ET (12:50GMT). It fell to 1.0352 earlier, the weakest level since January 2003, as investors digested news of two separate deadly incidents in Turkey and Germany.
The Russian ambassador to Turkey, Andrei Karlov, was shot and killed at an art gallery in the Turkish capital of Ankara Monday evening.
A few hours later, a truck plowed into a crowded Christmas market in central Berlin, killing 12 people and injuring up to 50 others in what Germany's interior minister said looked like a terror attack.
Meanwhile, the dollar rallied to a fresh 14-year high against a basket of major currencies, with markets focused on the possibility of further U.S. interest rate hikes next year.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.5% at 103.59 in early trade, a level not seen since December 2002.
Optimistic remarks on the U.S. labor market by Federal Reserve Chair Janet Yellen strengthened the possibility of further rate hikes next year.
Speaking at the University of Baltimore’s midyear commencement ceremony Monday, Yellen said recent improvements in the economy have created one of the strongest job markets in years for graduates.
The speech came a few days after the U.S. central bank hiked interest rates for the first time in a year and projected three more increases in 2017, up from the two projected in September.
Elsewhere, the dollar climbed 0.85% to 118.12 against the yen, within sight of a 10-1/2-month high of 118.66, as fresh buying emerged after the Bank of Japan kept monetary policy unchanged at its final meeting of the year on Tuesday.
The BOJ affirmed its twin targets of minus 0.10% interest on some excess reserves and the 0.0% 10-year government bond yield. The central bank also raised its assessment of the economy for the first time since May 2015, noting that “exports have picked up.”
Volumes are expected to thin in coming days before the Christmas holiday season and end of the year.