Dollar holds mostly steady ahead of Trump's SOTU Address, draws support from euro

The dollar held mostly steady against its peers on Wednesday, moving in a narrow range ahead of U.S. President Donald Trump's State of the Union address while drawing support from a sagging euro, which was weighed by soft data. The dollar index against a basket of six major currencies hovered near an 11-day high of 96.12 reached overnight. Immediate investor focus was on President Trump's State of the Union address at 0200 GMT.

"Of the most interest to the currency market is President Trump's views on the U.S.-China trade row. The government shutdown has ended for now but Trump's stance on the budget will also be in focus," said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch. The euro was little changed at $1.1407 after slipping 0.25 percent the previous day to its lowest since Jan. 28.

The single currency was pressured after a survey released on Tuesday showed euro zone businesses expanded at their weakest rate since mid-2013 at the start of the year. The dollar was steady at 109.96 yen after posting a gain of 0.4 percent overnight. The greenback managed to rise although U.S. Treasury yields declined the previous day and pulled back from one-week highs.

"The dollar is managing to draw support in spite of lower Treasury yields thanks to a combination of a dovish-sounding Federal Reserve and U.S. data, which has been relatively strong on the whole recently," Yamada at Bank Of America Merrill Lynch said. The pound extended an overnight slump and brushed $1.2923 , its lowest since Jan. 22. Sterling had lost nearly 0.7 percent on Tuesday on a weak Purchasing Managers' Index data and uncertainty about Brexit talks.

The Australian dollar was up 0.1 percent at $0.7242 . The Aussie was on a firmer footing after bouncing from a low of $0.7194 the previous day, when the Reserve Bank of Australia held interest rates steady and sounded less dovish than some had braced for. 

(With inputs from agencies.)