Dollar retraces early gains as investors consolidate positions

Getty Images

The dollar fell on Tuesday as the greenback consolidated its position against most major currencies following a roller-coaster 24 hours which traders say may just be a precursor to three weeks of risk-packed events including the Federal Reserve's December policy meeting.

After rising across the board and gaining more than 1.2 percent against the safe-haven Japanese yen following the release of stronger-than-expected U.S. third-quarter gross domestic product numbers, the dollar retraced much of its gains on the day.

We see short-term consolidation of dollar: JPMorgan

Even a reading on U.S. consumer confidence that showed the index at its highest level since July 2007 did not dissuade investors from selling the greenback as North American trading picked up steam.

"Some people do trade off of headlines, but why should we react to what happened in the period ending in September when instead we're looking forward to what will happen next month?" said Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co. "The markets are anticipatory in nature."

The , which tracks the greenback against a basket of six major rivals, scaled to a nearly 14-year peak of 102.050 on Thursday before profit-taking and oil price jitters brought it back down to earth. It has continued to move lower this week, but has remained in a tight range.

It was last down 0.34 percent to 100.99.

The dollar was last up 0.44 percent against the at 112.41 yen. The euro was up against the dollar at $1.0638.

The modest pullback in the dollar's upward trajectory seemed more a consolidation than a correction, Chandler said, and reflected the underlying trend in markets that are still expecting substantial fiscal stimulus from the administration of U.S. President-elect Donald Trump and interest rate increases from the Federal Reserve.

Additionally, Wednesday's meeting of the Organization of the Petroleum Exporting Countries and Sunday's referendum in Italy still loom.

"We had a big move up in the dollar, the dollar was overextended and we've been consolidating and correcting at the end of last week and yesterday," Chandler said. "I think we continue to do so today."

Gap very narrow in referendum polls: Italian foreign minister

Sterling's move higher against the dollar was also backed by UK data that showed lending to Britons expanded last month at the fastest annual pace in 11 years, while mortgage approvals were stronger than expected, bolstering the picture of resilient consumer demand after June's Brexit vote.

The pound rose 0.68 percent against the dollar to $1.2496.

— Follow CNBC International on Twitter and Facebook.