The Dollar remained close to a two-week high on Wednesday in a rally reinforced by higher US Treasury yields as investors await minutes from the Fed’s December meeting.

When writing, the Euro was up 0.12% against the Dollar at $1.0954, after declining 0.95% on Tuesday in its largest daily fall since July.

This helped to drive the Dollar index – measuring the currency against six major rivals – down to 102.18, yet it retained the majority of the previous day’s gains of 0.86%, Reuters reports.

A risk appetite surge at the end of 2023, fuelled by a fall in inflation and a dovish stance in the Federal Reserve’s policy meeting last month, drove bets for rate cuts in the US this year.

This led the Dollar to drop to a five-month low last week of 100.61 and triggered a rally in Treasuries and stocks.

However, the S&P 500 and Nasdaq Composite closed lower in the year’s first trading session, weighed by major tech names.

“I think that what happened in the latter half of December was just not justified,” according to Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

“The markets got carried away with this view of imminent Fed cuts in the first quarter, that took the Dollar off. So I do think that this reversal can carry on for a bit longer.”

The Dollar was up 0.43% against the Japanese Yen at the time of writing at 142.57, adding to Tuesday’s gain of 0.82%, the Reuters report adds.

Investors are awaiting the Fed’s December meeting minutes later today for any indications as to how many rate cuts the central bank may undertake in 2024.

Elsewhere, Sterling rose 0.21% to $1.2646, after declining 0.87% in the previous session, the largest daily drop in almost three months.