Investing.com - The euro pushed higher to trade near three-week highs on Thursday and the dollar dipped ahead of the European Central Bank’s final policy meeting of the year.
EUR/USD was up 0.18% at 1.0772, holding just below Monday’s highs of 1.0795, the highest level since November 15.
The ECB is likely to announce an extension of its €80 billion a month quantitative easing program, which is on track to end in March 2017, but may also signal that a decision on when it will begin tapering asset purchases will come soon.
The single currency slumped to 20-month lows on Monday after Italian Prime Minister Matteo Renzi's referendum defeat and subsequent confirmation that he would resign.
But the euro quickly rebounded as fears over the political risk factors for Italy appeared to have been overstated.
But concerns over Italy’s ailing banking sector remained in focus.
Italy’s government on Thursday requested more time from the ECB to rescue Banca Monte dei Paschi (MI:BMPS), arguing that Renzi’s resignation makes it impossible to finalize the rescue more quickly.
The dollar slid lower against a basket of six other major currencies, with the U.S. dollar index down 0.21% to 100.08, not far from a three-week low of 99.87 set on Monday.
The dollar was weaker against the yen, with USD/JPY down 0.25% to 113.47, off the nine-and-a-half month high of 114.83 touched last week.
Demand for the dollar continued to be underpinned by expectations that the Federal Reserve will hike interest rates at its upcoming meeting next week.
According to Investing.com's Fed Rate Monitor Tool, 100% of traders expect the Fed to raise interest rates at the meeting.
The New Zealand dollar was higher, with NZD/USD advancing 0.68% to 0.7216 after the country’s central bank said Thursday that interest rates are likely to remain on hold for some time.
The Australian dollar was also higher, with AUD/USD up 0.29% at 0.7501 after data showing that both Chinese imports and exports rose in November, pointing to a pick-up in domestic and global demand.