Investing.com - The dollar pushed higher against a currency basket on Monday, but gains looked likely to remain limited as concerns over the Trump administration’s commitment to a strong currency weighed.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.25% to 89.09 by 02:55 AM ET (07:55 AM GMT), extending its recovery from last Thursday’s three year trough of 88.25.
The greenback remained on the defensive after U.S. Treasury Secretary Steven Mnuchin said last Wednesday at Davos that a “weaker dollar is good for trade.”
The greenback recovered somewhat after President Donald Trump said Thursday the U.S. currency would get “stronger,” appearing to contradict Mnuchin’s comments.
Mnuchin’s remarks were seen by markets as a departure from traditional U.S. currency policy. The risk of a weaker dollar is that it could undermine confidence in a wide swath of U.S. assets, including the U.S. Treasury market.
The dollar is also losing its relative yield attraction for investors. A faster rate of monetary tightening outside the U.S. would lessen the divergence between the Federal Reserve and other central banks.
The dollar found some support after Friday’s U.S. GDP data showed that domestic consumption and capital spending remained strong even though the headline figure was weaker than expected due to a rise in imports.
The dollar gained ground against the yen, with USD/JPY climbing 0.41% to 109.04 after falling to a four-and-a-half month low of 108.27 on Friday.
The yen had been boosted after Bank of Japan Governor Haruhiko Kuroda said the bank expects the economy to continue growing at a moderate pace and inflationary expectations are picking up.
The euro was lower, with EUR/USD slipping 0.23% to 1.2398, down from the more than three year peaks of 1.2537 reached on Thursday.
Sterling was weaker against the dollar, with GBP/USD losing 0.3% to trade at 1.4118.
The Australian and New Zealand dollars were also lower against their U.S counterpart, with AUD/USD shedding 0.31% to trade at 0.8084 and NZD/USD losing 0.3% to trade at 0.7326.