Dollar rises as US economy outlook brightens

The dollar rose on Tuesday in thin pre-holiday trade as increasing evidence of a solid recovery in the United States reinforced convictions the Federal Reserve will continue to step away from its bond buying stimulus.

(Read more: These currencies will fare worst vs the dollar in 2014)

In the very near term, the market will likely struggle to find fresh stimulus ahead of year-end holidays. Most financial markets will be shut on Wednesday for the Christmas Day holiday and many will stay closed on Thursday.

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U.S. stocks were little changed ahead of an early close while European stocks edged up, adding to the best run-in to Christmas since 1999, although trading in the shortened session was thin.

In late morning New York trade, the euro was down 0.2 percent at $1.3664. Against the yen, the common currency flat at 142.58, but not far from a five-year high of 142.90 set last week.

The dollar gained 0.2 percent to 104.34 yen, not far off a five-year high of 104.63 touched on Friday.

—By Reuters.