Investing.com - The euro was hovering close to 14 month lows against the broadly stronger dollar on Tuesday as the diverging monetary policy stance between the Federal Reserve and the European Central Bank weighed.
EUR/USD touched lows of 1.2859, the weakest since July 2013 and was last trading at 1.2889.
The pair was likely to find support at the 1.2875 level and resistance at around 1.2925.
The dollar has rallied in recent weeks amid expectations that the Federal Reserve may announce a rate increase earlier than expected after economic data indicated that the recovery in the U.S. is progressing strongly.
The dollar’s rally paused on Friday after the latest U.S. employment report showed that the rate of jobs growth slowed in August, before shrugging off the data and resuming its run higher.
The Fed is expected to wind up its asset purchase program in October and to start raising interest rates sometime in mid-2015. In contrast, the ECB looks likely to stick to a looser monetary policy stance.
The euro weakened across the board after the ECB unexpectedly cut rates to record lows across the euro zone last week and unveiled new easing measures in a bid to shore up the faltering recovery and boost inflation.
The dollar received an additional boost after a study by the San Francisco Fed published on Monday indicated that central bank officials see rates rising earlier than markets expect.
Elsewhere, the euro was steady against the pound, with EUR/GBP trading at 0.8004, not far from Monday’s three month highs of 0.8036.
Sterling remained under pressure after a new opinion poll earlier Tuesday showed that support for Scottish pro-independence voters increased ahead of next week’s referendum.
Uncertainty over what currency an independent Scotland would use, as well as concerns over how much of the U.K. national debt it would take on have prompted investors to exit positions in sterling.
The pound found some support after data on Tuesday showed that U.K. industrial production posted its largest increase in five months in July, pointing to continued strong growth in the third quarter.
The euro pushed higher against the yen, with EUR/JPY easing up 0.11% to 136.83.
The yen was trading close to six year lows against the dollar, with USD/JPY up 0.16% to 106.18.