Dollar at 4-1/2 year high, commodity currencies pressured

The dollar rebounded on Tuesday, supported by a retreat in oil prices that has helped to lift it against commodity-linked currencies.

In mid-morning New York trade, the dollar index reached a 4-1/2 year high, while the greenback gained 1 percent against the Norwegian crown and hit a fresh 7-year high against the yen.

Upbeat comments from two influential Federal Reserve officials stressing the positive impact on the U.S. economy from the drop in energy prices contributed to the greenback's strength.

Getty Images

The biggest data point on the calendar is Friday's U.S. employment report.

Comments on Monday by Fed Vice Chairman Stanley Fischer and New York Fed President William Dudley that soft oil prices would only temporarily dampen overall U.S. prices, continued to resonate. The pair painted a mostly rosy outlook, suggesting the Fed was not letting energy markets distract it from lifting rates.

In contrast, the European Central Bank and the Bank of Japan are grappling with deflation threats and the sharp fall in oil prices add to their concerns. The ECB meets on Thursday.

The dollar index was up 0.63 percent at 88.49. The dollar advanced to a 7-year peak of 119.28 yen, up 0.72 percent. The euro fell to a one-week low of $1.2394, a loss of 0.54 percent on the day.

A Reuters poll put the November U.S. jobless rate at 5.8 percent, unchanged from October, with 230,000 jobs being added.

Average earnings are expected to pick up.

Falling crude oil prices knocked the Norwegian currency down 1 percent against the U.S. dollar to 7.0229 crowns.

The U.S. unit traded up 0.66 percent against the Canadian dollar at C$1.1402. The Aussie dollar fell 0.46 percent to $0.8453, flirting with Monday's four-year low of $0.8417.

—By Reuters

More on foreign exchange.