The dollar edged higher on Thursday after two days of losses in light trading, lifted by generally positive U.S. data and a tax overhaul plan that could prompt the Federal Reserve to raise interest rates at a faster-than-expected pace.
Still, the U.S. currency was on track to post its worst yearly performance in 14 years. That said, the medium-term outlook for the dollar has turned a little more positive than what many on Wall Street had priced in, with expected rate hikes from the Fed next year and, at the very least, modest benefits from the U.S. tax program.
U.S. economic data of late has become more dollar supportive.
Data showed on Thursday that the U.S. economy grew at 3.2 percent in the third quarter, its fastest pace in more than two years, boosted by robust business spending and poised for what could be a lift next year from sweeping tax cuts passed by Congress this week.
The Philadelphia Fed business conditions index for December was solid, with a higher-than-expected reading of 26.2.
"The GDP (gross domestic product) data came in slightly less than expected, but it's still a really good number," said John Doyle, director of markets at Tempus Consulting in Washington. "At the same time, you take that with the Philly Fed which was better than expected, and the outlook for GDP going forward especially with tax reform has provided a modest boost to the dollar."
The Republican-controlled U.S. Congress this week approved a broad package of tax cuts in what has been described as the largest overhaul of the tax code in 30 years. President Donald Trump could sign the tax bill into law this week.
The dollar was flat against a basket of major currencies at 93.28.
The euro was also unchanged at $1.1872 having gained around 1 percent so far this week, supported by a rise in German bond yields.
Against the , the dollar hit a more than one-week high after comments by Bank of Japan Governor Haruhiko Kuroda reinforced expectations that the BOJ was in no hurry to move away from its ultra-loose monetary policy.
Some investors had expected hints that policy might be coming to an end and the BOJ might raise its yield target for Japanese government bonds, after a recent speech by Kuroda that referred to the negative effects of ultra-expansionary monetary policy.
The dollar was last little changed at 113.32 yen.