Dollar extends recovery, yen rises on BOJ move

By Saqib Iqbal Ahmed

NEW YORK (Reuters) - The dollar edged higher against a basket of major currencies on Tuesday, to hit an eleven-day peak, as its decline last week to the lowest in more than three months continued to draw bargain hunters.

The dollar index <.DXY>, which measures the greenback against six rival currencies, was up 0.18 percent at 92.524. The index fell to 91.751 on January 2, its lowest since September 20.

"I think we came into this week with the dollar having been beat up over the better part of the last four weeks. The dollar looked ripe for a little bit of a recovery across the board," said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.

The euro extended losses from the previous session and slipped 0.27 percent to $1.1933. On Thursday, it had hit a nearly four-month high of $1.2089.

"We are seeing a little bit of the optimism surrounding the euro fade a little," Esiner said.

"While euro zone data continues to paint a picture of an economy that closed out 2017 with very strong momentum, there continues to be a significant lack of inflation that will ultimately keep the pace of ECB normalization very, very cautious," he said.

In recent weeks, the euro rallied on expectations for a shift in European Central Bank monetary policy this year, but weakened after Friday's cooler-than-expected reading of the euro zone's December consumer price index.

"With Europe's improving economic conditions supporting the euro and the outlook for the dollar still somewhat shaky amid low inflation concerns in the States, the EURUSD remains fundamentally bullish," Lukman Otunuga, research analyst at futures brokerage FXTM in London, said in a note.

The dollar fell against the yen after the Bank of Japan trimmed its purchases of long-dated government bonds in market operations, stoking speculation the central bank could start to wind down its huge stimulus policy this year.

Since it adopted its yield-curve-control policy in 2016, the BOJ has occasionally tweaked its bond operations, with officials saying any changes are meant to keep bond yields in line with its policy goal and not to telegraph hints on its future policy.

The Japanese currency hit a six-day high.

Sterling was down 0.24 percent against the dollar as investors took profits after a recent rally although expectations that Brexit talks will have a positive outcome continued to underpin the British currency.

(Reporting by Saqib Iqbal Ahmed; Editing by David Gregorio and Diane Craft)

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