The dollar leveled off versus the euro and sterling on Tuesday, holding onto most of its recent gains after a senior Federal Reserve official suggested it was time for the central bank to hike interest rates.
Citing the dangers of the current near-zero key lending rate, Kansas City Fed President Thomas Hoenig said the Fed should raise rates "sooner rather than later." Still, the Fed is expected to maintain its record low rates through 2010, hoping to avoid snuffing out tenuous economic expansion.
The dollar stayed near 1.4950 versus the sterling, about 2 cents from yesterday's 9-month peak near 1.4750. Speculation that the UK's Labour Party is in position to win a general election to be called in the first half of the year has created concerns about fixing the country's public finances.
Meanwhile, the buck stood near 1.3550, having touched a new 9-month peak of 1.3434 overnight.
The euro has come under heavy pressure due to uncertainty about the euro area's economic growth prospects. Greece's debt crisis has also soured traders on the euro, and while EU officials are in Athens working out an aid package, nothing concrete has been agreed upon.
The dollar dropped closer to parity with the loonie after the Bank of Canada held steady on interest rates but indicated that recent inflation data was warmer than expected.
The buck slipped to C$1.0310, its lowest level since mid-January.
As expected, the Bank of Canada retained its key overnight interest rate at 0.25% Tuesday morning.
Despite increasing evidence that the Canadian economy is experiencing a robust and sustainable recovery from last year's economic downturn, policy makers assured that a rate hike is at least a few months away, barring a significant change in consumer prices.
In quiet dealing, the dollar was stuck near 89 versus the yen.
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