Investing.com - The dollar trimmed gains against other major currencies on Wednesday, but still remained within close distance of a seven-week high as expectations for a March rate hike by the Federal Reserve continued to support demand for the greenback.
The greenback strengthened after Dallas Fed President Robert Kaplan reiterated his view on Monday that a rate hike should come sooner rather than later in order to curb rising inflation.
New York Fed President William Dudley said that the case for tightening monetary policy \"has become a lot more compelling\".
Meanwhile, San Francisco Fed President John Williams said that a rate increase was very much on the table for serious consideration at the March meeting given full employment and accelerating inflation.
The dollar was also boosted after the Institute for Supply Management earlier reported that its manufacturing activity index rose to 57.7 last month from January’s reading of 56.0. Analysts had expected an unchanged reading in February.
On a less positive note, the U.S. Commerce Department said personal spending increased by 0.2% in January, disappointing expectations for a 0.3% rise.
EUR/USD was down 0.23% at 1.0553, off a one-week low of 1.0514 hit earlier in the session.
Germany\'s Federal Statistics Office reported on Wednesday that the unemployment rate was unchanged at 5.9% this month, in line with analyst expectations.
The number of unemployed people declined by 14,000 from a month earlier, compared to forecasts for a drop of 10,000.
Elsewhere, GBP/USD dropped 0.53% to a six-week trough of 1.2313 after research group Markit said its U.K. manufacturing purchasing managers’ index fell to 54.6 last month from a reading of 55.9 in January.
Analysts had expected the index to inch down to 55.6 in February.
USD/JPY rallied 0.94% to 113.79, the highest since February 16, while USD/CHF gained 0.39% to 1.0095.
The Australian dollar was little changed, with AUD/USD at 0.7654, while NZD/USD retreated 0.89% to 0.7128.
Meanwhile, USD/CAD climbed 0.44% to trade at 1.3354, the highest since January 20.
In widely expected move, the Bank of Canada kept interest rates on hold at 0.50% on Wednesday and said that the current monetary policy stance remains appropriate.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.35% at 101.68, after hitting a seven-week high of 101.98 earlier in the day.