Dollar index holds losses after Fed's Beige Book

Key Points
  • ECB officials raise concerns about surging common currency
  • Dollar finds respite but outlook remains grim
  • Cryptocurrency rout accelerates on clampdown worries
  • Canadian dollar weakens as BOC rings cautious tone
Dan Kitwood | Getty Images

The euro slipped on Wednesday, pulling back from a three-year high above $1.23 as some European Central Bank officials voiced worries about the currency's strength.

The euro's decline helped stabilize the greenback, which held its modest losses against a basket of currencies on Wednesday even as the Federal Reserve's latest Beige Book showed U.S. business activity was expanding with inflation growing at a modest to moderate pace in late 2017.

The outlook for the dollar remains dour on the view that other central banks besides the Federal Reserve are moving away from the ultra low-rate stance and unconventional tools they adopted after the 2008 global credit crisis.

"There's still a lot of bearish sentiment on the dollar," said Minh Trang, senior foreign currency trader at Silicon Valley Bank in Santa Clara, California.

Still, the greenback snapped a four-session losing streak.

The index that tracks the greenback versus the euro, , sterling and three other currencies was last down 0.06 percent at 90.35.

The fell 0.39 percent to C$1.2385.

The euro was up 0.01 percent at $1.226 after hitting a three-year peak versus the greenback at $1.2322, Reuters data showed.

Digital currencies suffered another day of heavy losses on worries about a widening regulatory crackdown.

Bitcoin fell more than 10 percent to below $10,000 for the first time since Dec. 1 on the Luxembourg-based Bitstamp exchange. The biggest digital currency has lost half its value since it peaked near $20,000 about a month ago.

Here's why the dollar will stay lower for longer

ECB weighs in on rising euro

The speed of the euro's rise in early 2018 - up more than 3 percent in the last two weeks - has prompted comments from ECB officials, highlighting growing concerns, according to analysts.

ECB policymaker Ewald Nowotny told reporters on Wednesday the euro's recent strength against the dollar is "not helpful," which encouraged a bout of profit-taking before a policy meeting next week.

In an interview with Italian newspaper la Repubblica Vitor Constancio, the ECB vice president, said he did not rule out that monetary policy would still continue to be "very accommodating for a long time."

"The euro's strength will cause some concerns to the ECB and it will definitely complicate their policymaking thinking, and some investors are taking profits after the recent rally," said Adam Cole, chief FX strategist at RBC Capital Markets in London.