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(Bloomberg) -- The dollar climbed for a third day on position trimming, while the euro rose as investors weighed the prospects for European Central Bank tapering against the looming deadline in Spain for resolving the Catalonia standoff.

The greenback remained higher against most G-10 peers, with gains led by dollar-yen. The euro also advanced versus most of the same group, seeing a small uptick as the U.S. session moved along. The euro swung to a gain against the greenback to avoid its fifth daily drop. Flows were quite muted, according to traders in Europe, London and New York.

  • New York Fed President Dudley said the central bank is on track to deliver on its forecast of three interest rate hikes in 2017, reflecting a stance similar to that of Fed Chair Yellen, whose term expires next year. Yellen is believed to be in the running for another term as Fed chair, while four other candidates are also being considered
  • Earlier, ECB President Draghi offered little fresh insight into the bank’s thinking ahead of next week’s policy meeting, which may reveal further details on QE tapering plans. Traders continue to discuss variations of a taper extension of 6 months or longer, with purchases at half or less than the current EU60b monthly pace that is set to continue until the end of the year. While monetary-policy divergence may seem to favor the USD, trader sentiment toward the greenback remains guarded due to the uncertainty over continuity at the Fed and prospects for President Trump’s fiscal agenda and tax reform
  • A Spanish govt-issued deadline to Catalan President Carles Puigdemont is set to expire Thursday, by which time PM Rajoy has asked for clarification on the region’s intentions on independence amid the threat that he may revoke “self-rule” by invoking Article 155. Uncertainty over the situation has clouded the outlook for the euro, while it remains above the mid-October low at 1.1670 EUR/USD is trading at ~1.1772 after recently revisiting the top of a narrow 1.1730/81 range. Bids below 1.1740 cushioned an earlier drop and additional bids ahead of 1.1700 came into view
  • USD/JPY rose to a fresh daily high at 113.05, bolstered by a further decline in Treasuries that lifted yields. The yen was lower vs all of its G-10 peers. Offers to sell USD are positioned above 113.00, a London-based trader said. There’s “no shortage” of exporter supply on a 113.00 handle, according to a trader in New York JPY’s defensive tone comes ahead of weekend elections that seem set to return PM Abe to power, perhaps with a stronger majority for his LDP-led coalition, which likely would ensure a continuation of Abenomics. While the JPY has slipped in recent days, traders may wait for definitive election results before extending JPY losses, one trader said

To contact the reporter on this story: Dennis Pettit in New York at dpettit5@bloomberg.net.

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Greg Chang, Vivien Lou Chen

©2017 Bloomberg L.P.

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