The U.S. dollar rose against major currencies on Tuesday following better-than-expected retail sales data that pointed to underlying economic momentum as markets braced for interest rate moves from the Federal Reserve and other central banks.

Commerce Department data on Tuesday showed U.S. retail sales beat expectations by rising 0.7% in November, supported by a surge in auto and online purchases.

Markets expect the Fed to deliver a 25 basis point rate cut at the conclusion of its two-day policy meeting on Wednesday, with futures implying a nearly 97% chance of a cut, according to the CME FedWatch tool.

Against the Swiss franc, the dollar weakened 0.2% to 0.89270 in choppy trading, after holding near its highest level since July. The euro, which is set to lose nearly 5% against the dollar this year, was down 0.24% at $1.048825.

The U.S. dollar index, which tracks the greenback against a basket of six other currencies, rose 0.17% to 106.97, after trading as high as 107.08 earlier in the session.

"The market is trying to debate whether it's time to weaken the dollar, which has had a tremendous run this year," said Marvin Loh, senior global market strategist at State Street (NYSE:STT) in Boston.

"But it seems hard to really argue against U.S. exceptionalism and a stronger dollar ahead of a new administration, whether we're talking about a Fed that may not be as dovish as it was in September or the ongoing challenges in emerging and developed markets that make the dollar a safe haven."

The pound rose against the dollar after data showed U.K. wage growth accelerated more than expected in the three months to October. The Bank of England will announce its interest rate decision on Thursday. The pound gained 0.16% to $1.27040.

The yen strengthened against the dollar, as markets have discounted the possibility of a rate hike by the Bank of Japan this week in favor of a move in January. The yen rose 0.42% against the U.S. dollar to 153.52 per dollar.

The dollar weakened 0.06% to 7.287 against the offshore Chinese yuan, as expectations of Chinese economic growth kept 10-year bond yields near record lows.

The Australian dollar weakened 0.6% against the U.S. dollar to $0.6332, while the Swedish crown weakened 0.76% against the dollar to 10.964. The Norwegian krone also fell 0.56% to 11.2052 against the dollar.

Sweden's Riksbank is widely expected to cut interest rates by half a percentage point this week, while Norges Bank is likely to leave rates unchanged.

Bitcoin rose as high as $108,379.28, trading near $110,000, before paring gains and rising 0.68% to $106,798.26.

"I think the market is worried that there will only be two cuts in the (Fed's closely watched dot plot) next year; so that's a little bit positive for the dollar," said Steve Englander, global head of G10 FX Research and North American macro strategy at Standard Chartered (OTC:SCBFF) Bank in New York.
Source: Investing.com