Dollar clings to choppy trade after biggest surge since weeks

The dollar clung on to choppy trade on Wednesday after it had its biggest surge for weeks as Federal Reserve officials talked about the possibility of further aggressive interest rate hikes.

The U.S. dollar index, which measures the currency against six major peers, was slowed by 0.3 per cent to 106.120 by Asian afternoon, amid the relief that House Speaker Nancy Pelosi's visit to Taiwan brought few surprises.

The euro went up 0.2 per cent to $1.1085, though it remains under pressure, while the yen's overnight drop rose 0.3 per cent to 132.71 per dollar.

Pelosi arrived in Taiwan, which China considers a breakaway province, prompted anger in Beijing, with warplanes buzzing the Taiwan Strait and the announcement of live-fire military drills - though investors felt this was expected.

The market got a bit more relaxed, perhaps due to the U.S.-China situation. Moh Siong Sim, currency strategist at the Bank of Singapore, said. I think the market was bracing for a worse outcome, maybe no news is good news. Mary Daly and Charles Evans, Fed officials, signalled on Tuesday that they and their colleagues remain resolute and fully united over getting rates up to a level that will curb economic activity.

The comments by the normally very dovish Daly and the equally dovish Evans helped yields and the dollar higher, and the dollar index could top 108 in the next few weeks, according to Kristina Clifton, a strategist at Commonwealth Bank of Australia.

On Wednesday, the 10-year Treasury yields were steady after leaping nearly 14 basis points overnight.

The pound was 0.2 per cent higher to $1.2180, while the Antipodeans were near Tuesday's lows and seemed to be taking a breather from a month-long rally.

The Australian dollar fell on Tuesday after the central bank opened the door to a slowdown or pause in the pace of future hikes. It was last steady at $0.6930.

The New Zealand dollar fell after a surprise rise in unemployment weighed on hike expectations. It was last at 06255.