The dollar index, which measures the performance of the US currency against a basket of six currencies, rose 0.9% to 104.55 points. The index rose 8% last year, its biggest annual jump since 2015, thanks to the Fed raising interest rates to tackle inflation.
The market expects the US payroll data, due to be released on Friday, to show that the labor market remains tight.
The yen, which hit a seven-month high during Asian trading, was little changed at 130.45 to the dollar.
The Asian currency lost 12% against the dollar in 2022, and Japanese authorities intervened in September to prop it up for the first time since 1998, and again in October, when it weakened to a 32-year low of 151.94 to the dollar.
The euro was down about 1% against the dollar at $1.0553.
The focus was on German state inflation datawhich showed an easing of price pressures in December, indicating that domestic inflation may also have slowed for the second consecutive month, due in part to the government’s one-time payment of household energy bills.
For its part, the pound sterling fell 1% to 1.1933 dollars, briefly reaching its lowest level since November 30 of last year and the Chinese yuan ended the local session at 6.905 units per dollar, its strongest close since September 2, 2022.
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