Investing.com - The U.S. dollar pared back gains against a basket of the other major currencies on Tuesday, while the euro remained on the back foot as rising political risk in the euro zone weighed.
EUR/USD hit more than one-week lows of 1.0656 and was last at 1.0683, down 0.6% for the day.
Sentiment on the euro was hit by concerns over the possibility of a Brexit or Trump-style shock result in France’s upcoming presidential election.
Worries over elections in the Netherlands, Germany and possibly Italy, as well as the ongoing row over Greece's bailout added to concerns over political risk in the euro area.
Dovish remarks by European Central Bank President Mario Draghi, who on Monday downplayed calls for the bank to scale back its stimulus program, also kept the single currency on the defensive.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last up 0.54% to 100.39, off highs of 100.69.
The dollar pared back some of the days gains after Minneapolis Federal Reserve Bank President Neel Kashkari said the U.S. central bank should keep monetary policy moderately accommodative.
The comments came a day after Philly Fed President Patrick Harker said he would support hiking rates in March.
Against the yen the dollar was higher, with USD/JPY adding 0.57% to 112.37, after falling to overnight lows of 111.58, the weakest since November 29.
The traditional safe haven yen has risen almost 4% against the dollar since the start of the year amid a lack of clarity on U.S. President Donald Trump's economic policies.
Data on Tuesday showed that the U.S. trade deficit narrowed in December, to $44.3 billion, on the back of an increase in exports.
The report also showed that the U.S. trade deficit hit a four-year high in 2016, at $502.3 billion, up from $500.4 billion in 2015.
The data was likely to add to Trump’s claims that the U.S. needs to take a tougher approach on trade.
Sterling was weaker but came off two-week lows, with GBP/USD last down 0.63% at 1.2390.
The pound found some support following reports that lawmakers will get a vote on a Brexit deal before the European Parliament and after Bank of England policymaker Kirstin Forbes said that UK interest rates may soon need to rise.
The Canadian dollar fell to two-week lows after mixed domestic trade data.
USD/CAD hit highs of 1.3213, the most since January 24 and was last at 1.3154, up 0.57% for the day.
Official data showed that Canada posted a C$923 million trade surplus in December, as crude exports jumped, but while overall exports rose by 0.8% last month export volumes actually fell by 1.4%.
Another report showed that the value of Canadian building permits in December fell by 6.6%, the largest decline in almost a year.