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Dollar inches lower as attention turns to Fed leadership

The dollar edged down on Tuesday, stepping back from recent highs as market attention turns to who will be the next head of the U.S. central bank.

President Donald Trump told reporters on Monday he is "very, very close" to deciding who should chair the Federal Reserve after interviewing five candidates for the position.

These include current Fed Chair Janet Yellen, whose term expires in February, as well as Fed Governor Jerome Powell, Stanford University economist John Taylor, Trump's chief economic advisor Gary Cohn, and former Fed Governor Kevin Warsh.

"It's a big question for the markets. It's one thing to speculate about it, but it's another to take an FX position," said Bart Wakabayashi, branch manager for State Street Bank in Tokyo.

"Still, the rumors trigger some selling and buying, on perceptions of who might be more dovish or more hawkish," he said.

Investors are also following U.S. tax reform developments. The Senate's approval of a budget resolution on Friday raised hopes that Trump's tax plans would move forward this year.

The dollar index, which tracks the greenback against a basket of six major rivals, was down 0.2 percent at 93.741, moving away from 94.017, which had been its highest since Oct. 6.

The dollar inched 0.1 percent lower to 113.35 yen, pulling away from a three-month high of 114.10 yen hit in the wake of Sunday's general election in Japan.

Prime Minister Shinzo Abe's coalition scored a decisive victory, reassuring investors that his "Abenomics" policies would continue, including the Bank of Japan's easy monetary policy.

"The risk-on sentiment has stalled for now," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

"The Japanese election result was not so surprising, and was mostly priced in," he said.

The euro added 0.1 percent to $1.1762, though its gains were seen capped ahead of the European Central Bank's policy meeting on Thursday, where the authority is expected to signal it will take small steps away from its ultra-easy monetary policy.

Catalonia's separatist crisis pressured the euro. Madrid has invoked special constitutional powers to dismiss the Catalonian regional government and force elections to counter the independence movement.

A vote in the national Senate to implement direct rule on Catalonia is due on Friday.

The New Zealand dollar, meanwhile, had the rug pulled out from under it after the country's incoming Labour government laid out its left-leaning policies. It was last down 0.2 percent at $0.6949, within sight of a five-month low of $0.6932 plumbed on Monday.

The policies were seen as unfriendly to foreign investment and immigration, and could weigh on the currency given the country runs a current account deficit.

Oil prices inch up, support from drop in southern Iraq exports

Oil prices inched up on Tuesday, getting support from a decline in oil exports from OPEC's second-biggest producer Iraq and a projected extended fall in U.S. commercial oil stocks.

London Brent crude for December delivery was up 10 cents at $57.47 a barrel by 0651 GMT after settling down 38 cents on Monday.

U.S. crude for December delivery was up 6 cents at $51.96.

Iraqi oil exports have fallen more than 200,000 barrels per day (bpd) so far this month, as shipments from both the north and the south of the country declined.

"The market is currently weighing supportive materials more, such as the Kurdistan situation, the slowdown in shale-related (U.S.) rig counts and the possible extension in OPEC (output) cuts," said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

Crude oil exports through the Iraqi Kurdistan controlled-pipeline to the Turkish port of Ceyhan rose 13 percent to 288,000 barrels per day (bpd) on Monday afternoon, but that was still less than half normal levels due to tensions in the region, a shipping source told Reuters.

Iraqi Oil Minister Jabar al-Luaibi said on Saturday southern exports were increasing by 200,000 bpd to make up for the northern shortfall.

U.S. Secretary of State Rex Tillerson urged the Iraqi government and the Kurdistan region on Monday to resolve their conflict over Kurdish self-determination and disputed territories through dialogue.

The drop in supplies from Iraq comes as the Organization of the Petroleum Exporting Countries, Russia and other producers are cutting output by about 1.8 million bpd until March 2018 in an effort to drain a glut and support prices.

In September OPEC and non-OPEC countries achieved the highest compliance on planned cuts since the deal kicked off in January - at a rate of 120 percent - helping reduce oil stocks further at Organisation for Economic Cooperation and Development nations, OPEC said.

Russia held on to its position as China's top crude oil supplier, ahead of Saudi Arabia, for the seventh month in September, with shipments hitting a record 1.545 million bpd, customs data showed on Tuesday.

Meanwhile U.S. crude inventories likely fell by 2.5 million barrels last week, while gasoline and distillate stockpiles also fell, a preliminary Reuters poll showed on Monday ahead of data by the American Petroleum Institute later on Tuesday.

The U.S. oil rig count fell by seven to the lowest level since June, Baker Hughes data showed last week.

Dollar hits three-month high vs. yen on Abe election victory

The dollar touched a three-month high against the yen on Monday, with investors betting that an emphatic election victory for Japan's ruling party would see a continuation of the ultra-loose "Abenomics" policy that have kept downward pressure on the yen.

Japanese Prime Minister Shinzo Abe's ruling bloc scored a big win in Sunday's election, with his Liberal Democratic Party-led (LDP) coalition winning a combined 312 seats, keeping its two-thirds "super majority" in the lower house, according to media reports.

Abe's victory eased fears that the economic steps implemented under his leadership, including an expansive asset-purchase program by the Bank of Japan, would be disrupted and would halt the yen's depreciation against the dollar.

The dollar gained as much as half a percent to reach 114.10 yen after the results, its strongest since July 11. It came off those highs in early dealing in London but was still up 0.3 percent on the day.

"The relatively muted rise in dollar/yen following Abe's election win is consistent with the fact that this was very much the most expected result," said BNP Paribas (PA:BNPP) currency strategist Sam Lynton-Brown.

"The outcome should be consistent with the market continuing to price static and dovish policy from the BOJ, even in the context of (BOJ Governor Haruhiko) Kuroda's term coming to an end in April of next year."

Some analysts said Abe's emphatic win increased the chances that Kuroda, who is widely considered a policy dove, would be reappointed when his term ends.

"Overcoming deflation with the BOJ easing is at the crux of the Abe administration's policies and this will now be allowed to continue indefinitely," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

"It's relief over the BOJ policies, rather than hopes for fresh fiscal stimulus, that is weakening the yen."

The greenback had already gained about 0.9 percent against the Japanese currency on Friday, after the U.S. Senate approved a budget blueprint for the 2018 fiscal year, clearing a critical hurdle for Republicans to pursue a tax-cut package without Democratic support.

Against a basket of six major currencies, the dollar touched a 2-1/2-week high, having recorded its best day in a month on Friday.

Another focal point for the dollar was who U.S. President Donald Trump would appoint as the next Federal Reserve chief.

The euro was 0.3 percent lower at $1.1754, extending losses from Friday when it lost 0.6 percent.

The common currency has drifted lower from a 2-1/2-year peak of $1.2092 scaled on Sept. 8, as hopes for the European Central Bank to take a more hawkish stance have been tempered by speculation that it is not be in a hurry to taper its easy policy.

The ECB holds a policy meeting on Thursday, at which policymakers are seen cutting bond purchases but voting for an extension in stimulus.

Oil edges up on tighter supplies, strong demand

Oil prices rose on Monday over supply concerns in the Middle East and as the U.S. market showed further signs of tightening while demand in Asia keeps rising.

Brent crude futures were at $57.87 at 0622 GMT, up 12 cents, or 0.21 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude was at $52.04 per barrel, up 20 cents, or 0.39 percent.

"Oil prices are holding comfortably above $50 as possible supply disruptions in the Kurdish region of Iraq support prices," said William O'Loughlin, analyst at Rivkin Securities.

"U.S. production was also recently impacted by a hurricane for the second time in as many months and the number of U.S. drilling rigs declined for the third week in a row," O'Loughlin said.

The amount of U.S. oil rigs drilling for new production fell by seven to 736 in the week to Oct. 20, the lowest level since June, energy services firm Baker Hughes said on Friday.

With the U.S. tightening, flows from Iraq reduced due to fighting between government forces and Kurdish groups, and production still being withheld as part of a pact between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers to tighten the market, much will depend on demand going forward.

In Asia, growth remains strong especially in China and India, the world's number one and three importers.

China's oil demand remains voracious, hitting a January to September average of 8.5 million barrels per day (bpd).

"Three main factors are driving China's insatiable appetite for crude: declining domestic production, increased access to imports and exports for independent refiners, and building up the strategic petroleum reserve," Britain's Barclays (LON:BARC) bank said.

India's fuel thirst is also increasing. India imported a record 4.83 million barrels per day (bpd) of oil in September as several refiners resumed operations after extensive maintenance to meet rising local fuel demand.

The country's September imports stood 4.2 percent above this time last year and about 19 percent more than in August, ship-tracking data from industry sources and Thomson Reuters Analytics showed.

Given the tightening oil market conditions, many analysts expect prices to rise further.

"We will see oil prices higher by 10 percent by the end of the year. We have started to accumulate strong positions within the oil sector," said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.

Despite the tightening market and recent price rises, market volatility has been low.

The crude oil volatility index, which measures market expectations for 30-day price volatility, fell to levels similar of 2014 last Friday.

Dow, S&P 500 eke out record highs, turn up after Fed Powell report

The Dow and S&P 500 eked out record closing highs on Thursday, turning higher at the last minute after a Politico report that Federal Reserve Governor Jerome Powell is the leading candidate for the nominee for Fed chair.

Investors have been anxious to hear who President Donald Trump will pick as the nominee. A decision like Powell would likely be a continuation of the current stock market-friendly monetary policy that has helped fuel the market's more than eight-year bull run.

Stocks had been recovering from early losses for much of the afternoon but the S&P 500 and Dow were still a tad lower just before the Powell report.

"Clearly at the end it had everything to do with the speculation about Jerome Powell," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "I can't observe any other reason for why we ended up."

"He's viewed to be sort of an extension of (current Fed Chair) Janet Yellen by way of being a policy dove ... and, with the market loving more of the same with regard to uber-accommodative monetary policy, as more welcome than the alternative," he said.

Powell was among several names circulating as possible picks, including Yellen. Others include Trump's chief economic adviser, Gary Cohn, former Fed Governor Kevin Warsh and Stanford University economist John Taylor.

The White House on Wednesday said Trump will announce his decision on the matter in the "coming days."

Tech shares were among the day's biggest drags, led by Apple (O:AAPL), which fell 2.4 percent in its biggest daily percentage decline since Aug. 10 as doubts about its double 2017 iPhone release strategy weighed on investors.

The Dow Jones Industrial Average (DJI) rose 5.44 points, or 0.02 percent, to end at 23,163.04, the S&P 500 (SPX) gained 0.84 point, or 0.03 percent, to 2,562.1 and the Nasdaq Composite (IXIC) dropped 19.15 points, or 0.29 percent, to 6,605.07.

Stocks have posted a string of record highs in recent weeks, and the Dow closed above 23,000 for the first time on Wednesday.

The day also marked the 30th anniversary of the 1987 Black Monday stock market crash. Most traders see a repeat of the crash as unlikely because of modern trading technology and other changes.

Investors also took profits in the broader tech sector, which has had a strong run so far this year, gaining about 30 percent and helping drive the market's recent record run. The tech index (SPLRCT) was down 0.4 percent on the day.

Weighing on the market early as well was some disappointing news on the earnings front.

United Airlines (N:UAL) tumbled 12.1 percent, weighing on other airlines stocks after the third-largest U.S. carrier's profit fell due to flight cancellations during the hurricane season. American Airlines (O:AAL) fell 1 percent.

Shares of eBay (O:EBAY) were down 1.8 percent a day after it reported results.

Advancing issues outnumbered declining ones on the NYSE by a 1.04-to-1 ratio; on Nasdaq, a 1.33-to-1 ratio favored decliners.

About 5.8 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Asian shares, dollar gain after U.S. Senate passes budget plan

Asian shares and the dollar gained on Friday after the U.S. Senate approved a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue a tax-cut package without Democratic support.

European stock futures (STXEc1) rose 0.3 percent, pointing to a firm start, while Daxfutures (FDXc1) rose 0.4 percent and CAC 40 futures (FCEc1) were up 0.3 percent.

By a 51-to-49 vote, the Republican-controlled Senate voted for the budget measure late on Thursday, which would add up to $1.5 trillion to the federal deficit over the next decade in order to pay for proposed tax cuts.

"The U.S. Senate has passed a budget resolution which paves the way for potential tax reforms in the U.S. So that has seen the dollar strengthen and U.S. yields move higher, as a result we've seen Asian currencies weaken," said Khoon Goh, head of Asia Research at ANZ.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS), which scaled a 10-year peak on Tuesday, was up 0.3 percent, but still down slightly for the week.

U.S. S&P 500 e-mini futures were up 0.3 percent, and the benchmark 10-year Treasury yield (US10YT=RR) rose to 2.353 percent from its U.S. close of 2.321 percent on Thursday.

Shares in New Zealand <.NZ50> notched their 14th straight rising session and fifth winning week to close at a record after the nationalist New Zealand First Party agreed to form a new government with the center-left Labour Party following weeks of political negotiations, ending the center-right National Party's decade in power.

But the New Zealand dollar wallowed at five month lows after a 1.7 percent fall on Thursday, its largest daily fall since June 2016, on concerns the new Labour coalition will take a tougher stance on immigration and foreign investment than the outgoing center-right government.

Hong Kong's Hang Seng index (HSI) was up 0.8 percent, recovering some of Thursday's 1.9 percent loss. On the mainland, the Shanghai Composite Index (SSEC) edged slightly higher, while the blue-chip CSI300 index (CSI300) was down 0.3 percent.

Japan's Nikkei (N225) erased its earlier losses and eked out a 0.04 percent gain, and a robust weekly rise of 1.4 percent. The Nikkei logged its 14th gaining session, its longest such streak since 1961.

U.S. stocks were almost flat on Thursday, with Apple Inc (O:AAPL) falling 2.4 percent on signs of weak demand for the iPhone 8 that caused analysts and investors to question the company's staggered release strategy for its latest phones. (N)

The dollar buckled and U.S. bond yields dipped on Thursday after a report that President Donald Trump was leaning toward Jerome Powell as the next chair of the Federal Reserve.

Powell is seen as the most dovish of the Republican candidates. The current chair, Janet Yellen, a Democrat who is seen as a policy dove, is also on Trump's short list, though few investors expect Trump to nominate a Democrat to the job.

"Clarity about the Fed nomination would be positive for the dollar," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

The dollar index, which tracks the greenback against a basket of six major rivals, rose 0.2 percent to 93.494, up 0.4 for the week.

The dollar jumped 0.6 percent to 113.16 yen , on track to gain 1.2 percent for the week, as investors awaited Sunday's Japanese general election.

Japanese Prime Minister Shinzo Abe's ruling bloc is expected to secure a roughly two-thirds majority in Sunday's general election.

"That kind of result would not have a big impact on the yen," said Yamamoto, "but it is important to see whether or not the [ruling Liberal Democratic Party] considers it a victory for Abe or not, and it's difficult to say where the threshold for that might be."

The euro was 0.4 percent lower at $1.1808, moving back toward this week's low of $1.1730 and down 0.1 percent for the week.

In Europe, shares notched their largest drop in two months on concerns over political upheaval in Spain and after disappointing results from large companies such as Unilever(LON:ULVR), France's Publicis and Germany's Kion.

Spain's central government said on Thursday it would suspend Catalonia's autonomy and impose direct rule after the region's leader threatened to go ahead with a formal declaration of independence if Madrid refused to hold talks.

Crude oil prices firmed after shedding more than 1 percent on Thursday, breaking four days of gains, pressured by larger-than-expected product inventories in the United States and profit-taking after a recent run-up in markets.

Crude Oil Prices Remain Higher After Drop in U.S. Stockpiles

Oil prices remained higher on Wednesday, after data from the U.S. Energy Information Administration showed that domestic crude stockpiles declined more than expected last week.

U.S. West Texas Intermediate (WTI) crude futures were up 42 cents, or around 0.75% at $52.28 a barrel by 10:35 a.m. ET (14:35 GMT). Prices were at around $52.23 prior to the release of the inventory data.

Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S. gained 47 cents or about 0.81% to $58.35 a barrel.

The U.S. Energy Information Administration said in its weekly report that crude oilinventories fell by 5.73 million barrels in the week ended October 13.

Market analysts' expected a decline of around 4.24 million barrels, while the American Petroleum Institute late Tuesday reported a supply-drop of 7.1 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, increased by 202,000 barrels last week, the EIA said.

The report also showed that gasoline inventories rose by 908,000 barrels, compared to expectations for an increase of 256,000 barrels. For distillate inventories including diesel, the EIA reported a gain of 528,000 barrels.

The commodity had already strengthened following reports on Tuesday that Iraqi forces took control of oil fields in Kirkuk.

The fighting follows a referendum in which the Kurds, who run their own semiautonomous region in northern Iraq, voted overwhelmingly in favor of independence last month, defying Baghdad, regional powers and the U.S.

Elsewhere, gasoline futures were up 0.44% at $1.637 a gallon, while natural gas futureslost 2.60% to $2.885 per million British thermal units.

Asia stocks shed gains after data shows slower China growth

Asian stocks shed early gains on Thursday, pulling back from decade highs, with Chinese equities leading the way lower after data showed growth in the world's second largest economy slowed slightly in the third quarter.

The dollar halted its decline, supported by higher U.S. yields.

Spreadbetters expected Britain's FTSE (FTSE) to open 0.1 percent lower, Germany's DAX (GDAXI) to start flat and France's CAC (FCHI) to open down 0.1 percent.

Data on Thursday showed China's economic growth cooled slightly to 6.8 percent in the third quarter from a year earlier, from the second quarter's 6.9 percent, as widely predicted.

A modest loss of momentum had been expected as the government reins in the heated property market and cracks down on riskier lending.

Other data showed China's industrial output rise a stronger-than-expected 6.6 percent in September, while retail sales also outperformed, though investment growth eased more than expected and property sales fell for the first time in over two years.

The Chinese yuan and stocks eased, with Shanghai (SSEC) falling 0.4 percent.

"The GDP reading could weigh negatively on both mainland stock and currency markets as traders may position for further weakness into year-end suspecting financial curbs will continue to have a negative impact on growth in China," said Stephen Innes, head of Asia-Pacific trading at OANDA in Singapore.

Early in the day, MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rose toward a 10-year high scaled on Tuesday but it was last down 0.1 percent.

South Korea's KOSPI (KS11), on a record breaking tear for the past week, touched a historical high before retreating 0.4 percent. Australian stocks (AXJO) also pared gains to stand little changed.

Japan's Nikkei rose to a fresh 21-year high and was up 0.4 percent (N225), poised for its 13th straight session of gains.

The Nikkei was buoyed after the Dow (DJI) closed above 23,000 for the first time on Wednesday, driven by a jump in IBM (NYSE:IBM) after it hinted at a return to revenue growth. (N)

Elsewhere, Germany's DAX (GDAXI) had risen to another record high overnight, thanks to a soggy euro .

"The surrounding environment continues to favor the broader risk asset markets, with global economies recovering gradually and inflation staying low," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

"Potential factors that could impact the markets in the short term are changes to the Federal Reserve's leadership and China's Communist Party conference."

The term of current Fed Chair Janet Yellen's expires in February and investors are keen to see who U.S. President Donald Trump will pick as her replacement. The White House said Trump will announce his decision in the "coming days".

China's twice-a-decade congress kicked off on Wednesday. The focus is on how much power President Xi Jinping can cement, and whether he will use the extra clout to push through with more extensive but potentially risky economic and financial market reforms.

The dollar index against a basket of six major currencies was steady at 93.340 (DXY).

The index ended a four-session winning run overnight on lackluster U.S. data but resumed its climb after the 10-year Treasury yield (US10YT=RR) spiked 4 basis points with safe-haven bond prices falling on better investor risk appetite.

The dollar was little changed at 112.940 yen after climbing 0.6 percent overnight. The euro nudged up 0.15 percent to $1.1802 .

The New Zealand dollar dropped 0.8 percent to $0.7095 on nervousness ahead of a of a much-awaited announcement on the new government following an inconclusive election last month.

In commodities, Brent crude oil futures (LCOc1) dipped 0.1 percent to $58.11 a barrel.

Brent had risen to a three-week high of $58.54 a barrel on Wednesday on worries about tensions in Iraq and Iran, but lost steam after a surprising drop in U.S. refining rates and an unexpected build in fuel stocks signaled slower demand in the world's top oil consumer.

Dollar edges up as Fed, tax reform news awaited

The dollar edged higher on Wednesday, as markets awaited further news on the possible appointment of a hawk as Fed chair and progress on U.S. tax reforms.

The dollar index (DXY) rose 0.1 percent to 93.58, extending a rebound from Friday's 2 1/2-week low of 92.749. It rose as high as 93.729 on Tuesday.

"The overnight news of progress in negotiations over the new U.S. tax plan seems to be dollar-positive but we have to see some strong economic data before the dollar breaks higher," said Jane Foley, senior FX strategist at Rabobank.

U.S. Senate Republicans on Monday gained crucial support for a vote on a budget resolution that is vital to President Donald Trump's hopes of signing tax reform legislation into law before January.

Morgan Stanley (NYSE:MS) strategists noted the reforms may come at a time when the U.S. has used up all its spare capacity.

Investors will also focus on U.S. Beige Book data later in the day, with some likely to be wary of buying dollars aggressively after disappointing U.S. inflation data.

With the Federal Reserve expected to raise interest rates for the third time this year in December, markets are looking to who will replace Janet Yellen as chair when her term expires in February.

Trump has a pool of five candidates to choose from and is likely to announce his choice before going to Asia in early November, a source familiar with the situation said on Tuesday.

Asian shares consolidated recent gains

Asian shares consolidated recent gains and currencies kept to tight ranges on Wednesday as the opening of China's Communist Party conference produced more in the way of aspirational politics than concrete policies.

The twice-a-decade congress is expected to cement the power of President Xi Jinping, who kicked off the week-long event with a wide-ranging speech in which he said the market would be allowed to play a decisive role in allocating resources.

Yet he also said the role of the state in the economy had to be strengthened.

Investors are keen for clear direction on economic and financial market reform over the next five years, but history suggests these events can be light on detail.

China's blue-chip CSI300 index (CSI300) added 0.5 percent in reaction, while Shanghai stocks (SSEC) rose 0.3 percent.

"Market participants are paying much more attention to the party congress this time, as they are watching if any surprise reforms will emerge amid concerns over economic growth," said Yan Kaiwen, analyst with China Fortune Securities.

On Tuesday, the United States again declined to name China as a currency manipulator although it remained critical of the Chinese government's economic policies ahead of a planned visit to Beijing by President Donald Trump.

Recent economic data from the Asian giant has been generally upbeat, fuelling a tide of optimism about global growth that has benefited shares across the region.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was steady near their highest since late 2007, while South Korea (KS11) was just off a record top.

Japan's Nikkei (N225) added 0.2 percent and was trying hard to string together a 12th straight session of gains.

An opinion poll by Kyodo showed Japanese Prime Minister Shinzo Abe's coalition was on track for a roughly two-thirds majority in Sunday's general election there.

The bullish mood on equities was evident in the latest fund manager survey from BofA Merrill Lynch.

"For the first time in six years, Goldilocks trumps secular stagnation, with a record high 48 percent of investors surveyed expecting above-trend economic growth and below-trend inflation," the survey found.

BEARISH ON BONDS

Investors were bearish on bonds with 82 percent of those surveyed expecting yields to rise in the next 12 months and a record 85 percent believing bonds were overvalued.

Yields on two-year U.S. Treasury paper (US2YT=RR) have hit their highest since November 2008 amid speculation President Trump could chose a more hawkish leader to replace Federal Reserve Chair Janet Yellen.

Interest rates futures <0#FF:> imply around a 90 percent probability of a Fed hike in December .

The shift upward in yields lifted the dollar to a one-week top against a basket of currencies (DXY), and nudged it up 0.1 percent on the yen to 112.29 .

The euro was holding at $1.1765 , still some way above the recent low and major chart support at $1.1667.

Dealers were wary ahead of speeches by several policymakers from the European Central Bank due later on Wednesday, which includes President Mario Draghi.

The biggest mover had been Mexico's peso which boasted its biggest rise in over four months after trade ministers from the United States, Canada and Mexico extended the deadline on a contentious round of talks.

On Wall Street, the Dow (DJI) had ended Tuesday up a slim 0.18 percent having briefly broken above the 23,000-point mark for the first time on Tuesday, while the S&P 500 (SPX) gained 0.07 percent and the Nasdaq (IXIC) dipped 0.01 percent.

Shares in IBM (N:IBM) jumped nearly 5 percent after hours as a shift to newer businesses such as cloud and security services helped it beat Wall Street's quarterly revenue estimates.

In commodity markets, talk of higher U.S. interest rates kept gold pinned down at $1,284.81 an ounce.

Oil prices got a boost from a drop in U.S. crude inventories and concerns that tensions in the Middle East could disrupt supplies. Brent crude futures (LCOc1) firmed 34 cents to $58.22 per barrel, while U.S. crude (CLc1) gained 18 cents to $52.06.