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2018.01.1702:10:00UTC+00Dollar Falls to 3-Year Low, Euro Brushed Off Market Coalition Concerns

The dollar slumped to a three-year low against its peers on Wednesday, losing its earlier gain as the euro retreated after brushing off a setback to Chancellor Angela Merkel's chances of forging a “grand coalition” in Germany.

The dollar index against a basket of six major currencies last stood flat at 90.446 after reaching 90.113, its lowest since December 2014.

The index momentarily rebounded to as high as 90.826 on Tuesday after dropping steadily this month on investors' expectations that major central banks would eventually taper stimulus to normalise monetary policy.

The euro was 0.05 percent higher at $1.2266, shrugging off weakness seen overnight and going as high as $1.2323 earlier, its strongest since December 2014.

The single currency had dropped to $1.2195 on Tuesday after news which suggested the ECB might not tweak its policy message very soon, which curtailed the currency's rally.

The euro had also been held back on Tuesday as members of the centre-left Social Democrats in one of Germany's regions voted against talks with Merkel's conservative Christian Democrats, stoking worries over whether she can form a “grand coalition”.

The dollar was up 0.2 percent at 110.675 yen, inching back towards a high of 110.985 marked on Tuesday.

The pound went as high as $1.3836, its strongest since June 2016. It last stood little changed on the day at $1.3792.

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