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The greenback hit a two-month peak against a basket of major currencies on Wednesday, fueled by robust U.S. housing data, which is backing the Fed’s case for a rate hike in the near term, but has seen a slight drop.

The dollar index edge lower by about 0.1 percent to 95.50, after posting earlier gains of 95.66, higher than the previous hit after data showed new U.S. single-family home sales rallied by over eight-year peak in April and prices has seen hitting a record high.  

Apparently, there was a short-covering after the dollar rallied, as many investors are expecting on data and events in coming days, according to market participants.

The director of Global-info Co Kaneo Ogino said, "People are taking a low profile today. Most people are just squaring positions ahead of the month-end."

"The dollars downside should be limited for now," he added.

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The Federal Reserve’s policy meeting minutes find support from the upbeat housing numbers after it was released last week, suggesting that the central bank could start raising rates if the economy remained solid.

Meanwhile, the euro increased 0.1 percent, hitting $1.11, but settled slightly away from its 10-week low of $1.11 on Tuesday when it dropped 0.7 percent.

The greenback lost 0.1 percent to 109.93 yen, after earlier gains of 110.19 in the course of the session. It has seen a three-week peak of rallied 110.59 yen on Friday.

A strategist at Barclays Shin Kadota said, "The dollar may need further incentives to challenge recent highs and climb yet higher. These fresh incentives could come in the form of more data due later this week, and Japans stance on fiscal stimulus, which would in turn boost the Nikkei and improve risk appetite."

The dollar would be able to take signals over the coming days from data, including the initial jobless claims in the U.S. and home sales that are on hold on Thursday. In addition, it also includes the Japanese inflation and the U.S. first quarter GDP figures on Friday.

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Fed Chair Janet Yellen is expected to speak on Friday, implying for a concluding day for the G7 summit that is held in Japan.

When the G7 summit made its way out, markets will be eyeing on whether Tokyo could possibly halt the scheduled sales tax hike and implement fiscal stimulus measures.

Furthermore, the themes of the “Brexit” continued to intervene the pound, which rallied overnight after the recent poll has shown a solid support for Britain to stay in the European Union.

Sterling slid 0.2 percent to $1.46 as investors locked in gains after it has seen an increase in a five-day high of $1.46 on Tuesday, when it climbed over 1 percent. 

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