Dollar Lower Before New Year Break

The U.S. dollar drifted lower against its major counterparts during European trading on Tuesday in thin trading at the end of the year.

Optimism over US-China trade deal and upbeat China factory activity reduced the appeal of the safe-haven currency.

The South China Morning Post reported, citing a source, that Chinese Vice Premier Liu He is set to lead a delegation to Washington this Saturday to sign the phase one trade deal with the U.S.

China has accepted the U.S. invitation for signing deal in Washington, and the Chinese delegation will remain in the U.S. for a few days until the middle of next week.

Official data showed that China factory activity expanded for a second straight month in December.

The manufacturing PMI held steady at 50.2 in December, while it was forecast to fall to 50.0.

Investors await U.S. consumer confidence index, S&P/Case-Shiller home price index and FHFA's house price index due later in the day for more direction.

The currency has been trading lower against its major opponents in the Asian session.

The greenback declined to a 4-1/2-month low of 1.1222 against the euro from Monday's closing value of 1.1199. The greenback is likely to face support around the 1.14 level.

The greenback dropped to a 2-week low of 1.3188 against the pound, compared to 1.3111 hit late New York Monday. The next possible support for the currency is seen around the 1.34 mark. The U.S. currency fell to a 4-1/2-month low of 0.9665 against the franc and near a 3-week low of 108.51 against the yen, from yesterday's closing values of 0.9694 and 108.87, respectively. If the currency drops further, it may challenge support around 0.94 against the franc and 107.00 against the yen.

The greenback that ended Monday's trading at 1.3085 against the loonie, 1.6994 against the aussie and 0.6728 against the kiwi depreciated to a 5-1/2-month low of 1.3023, more than 5-month lows of 0.7013 and 0.6741, respectively. The greenback is seen finding support around 1.29 against the loonie, 0.72 against the aussie and 0.69 against the kiwi.

Looking ahead, U.S. FHFA's house price index and S&P/Case-Shiller home price index for October and consumer sentiment index for December are due out in the New York session.