NEW YORK (Reuters) - The dollar fell on Wednesday from its strongest levels in 2018 against a basket of currencies due to mild profit-taking, but is expected to resume its rise on solid U.S. economic growth and more interest rate increases anticipated from the Federal Reserve.
The weaker greenback stemmed from a bounce in the euro, which hit a fresh year-to-date low in earlier trading.
"There's a little exhaustion with the long-dollar trade, but I don't think we've reached the end of it yet," said Ilya Gofshteyn, FX and global macro strategist at Standard Chartered Bank in New York.
Concerns about the U.S. exit from an international nuclear deal with Iran had also supported the dollar in early Asian trading. For now, traders have put the issue on the backburner until any further development, analysts said.
"The market has kind of moved past this," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
The index that tracks the dollar against six currencies <.DXY> slipped 0.1 percent to 93.028 after touching a 2018 peak of 93.416 earlier.
The three-week long rally for the U.S. currency, in which it has reversed several months of weakness, has caused the unwinding of popular long bets on emerging market and G10 currencies.
The euro hit a year-to-date low of 1.1821 earlier on Wednesday before paring gains to $1.1875, for a 0.1 percent rise on the day, according to Reuters data.
The dollar climbed 0.5 percent to 109.68 yen <JPY=> and edged up 0.3 percent to 1.0044 Swiss franc <CHF=> on fading worries about U.S. President Donald Trump's decision to pull the United States out of the Iran nuclear deal.
The dollar's pullback was moderated by higher U.S. yields underpinned by expectations of rising U.S. inflation and a swelling U.S. budget deficit.
Low inflation remains a concern for major central banks.
On Wednesday, the U.S. government's producer price index grew by a slim 0.1 percent in April, less than what analysts had expected.
Swedish inflation edged down to 1.9 percent on a year-over-year basis last month, just below the Riksbank's 2 percent goal.
Nevertheless, the Swedish crown, one of the worst performing G10 currencies in 2018, rallied in the wake of the softer inflation reading. It jumped 1.4 percent versus the dollar <SEK=> and the euro <EURSEK=>.
Elsewhere, the Malaysian ringgit one-month deliverable forward <MYR1MNDFOR=> fell to its lowest against the dollar as that country's opposition party claimed it had won enough parliament seats to form the next government.
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Currency bid prices at 3:05PM (1905 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1860 $1.1862 -0.02% -1.13% +1.1897 +1.1823
Dollar/Yen JPY= 109.7200 109.1100 +0.56% -2.62% +109.8300 +109.0000
Euro/Yen EURJPY= 130.12 129.46 +0.51% -3.74% +130.4800 +129.3600
Dollar/Swiss CHF= 1.0045 1.0014 +0.31% +3.10% +1.0050 +1.0004
Sterling/Dollar GBP= 1.3553 1.3544 +0.07% +0.30% +1.3606 +1.3500
Dollar/Canadian CAD= 1.2843 1.2948 -0.81% +2.12% +1.2974 +1.2825
Australian/Doll AUD= 0.7462 0.7450 +0.16% -4.35% +0.7472 +0.7413
ar
Euro/Swiss EURCHF= 1.1920 1.1883 +0.31% +1.98% +1.1922 +1.1867
Euro/Sterling EURGBP= 0.8748 0.8757 -0.10% -1.52% +0.8767 +0.8727
NZ Dollar/Dolar NZD= 0.6988 0.6969 +0.27% -1.38% +0.6996 +0.6950
Dollar/Norway NOK= 8.0636 8.1389 -0.93% -1.75% +8.1625 +8.0516
Euro/Norway EURNOK= 9.5684 9.6549 -0.90% -2.85% +9.6641 +9.5650
Dollar/Sweden SEK= 8.6985 8.8172 -1.40% +6.06% +8.8591 +8.6817
Euro/Sweden EURSEK= 10.3160 10.4627 -1.40% +4.85% +10.4788 +10.3170
(Additional reporting by Tommy Wilkes in LONDON, Shinichi Saoshiro in TOYKO; Graphics by Saikat Chatterjee and Ritvik Carvalho; Editing by Paul Simao and Richard Chang)
