The euro and sterling climbed higher on Wednesday as investor confidence rose on news Britain had struck a draft divorce deal with the European Union after more than a year of talks.
The rise in the euro and sterling led investors to take profits on the U.S. dollar, which has retraced from a 16-month high.
The dollar index, a gauge of its value versus six major peers, traded at 97.05 on Wednesday, down 0.26 percent. The index hit a 16-month high of 97.69 on Monday.
The sell-off in the dollar has been due to the improved risk sentiment around a potential Brexit deal and not because of any deterioration in the fundamentals of the U.S. economy.
The British pound traded at $1.3009 on Wednesday, gaining 0.3 percent as traders reduced bearish bets after Britain and the European Union agreed a preliminary text that would allow the United Kingdom to leave the EU with a deal that avoids a chaotic “hard Brexit” departure.
Riding on the positive sentiment around a potentially orderly Brexit deal, the euro gained 0.1 percent to trade at $1.1301 on Wednesday.However, the gain was limited by concerns about Italy’s budget proposals and downbeat German investor confidence data, traders said.
The single currency lost 0.18 percent versus the pound to trade at 0.8687. The euro hit a 6-1/2 month low versus sterling of 0.8653 on Tuesday.
The dollar gained 0.11 percent versus the yen on Wednesday to trade at 113.93. The yen touched a six-week low of 114.20 on Monday.
The Australian dollar changed hands at $0.7224, gaining 0.12 percent versus the greenback.