The dollar weakened against major rivals at the end of a light session as traders wound down positions ahead of the holiday weekend.

At the turn of the year the prospects for the pound didn’t look good. The dollar was looking strong, and the euro looked as if it was going to test parity.

The US dollar fell back after disappointing US economic data sapped demand for the greenback. US consumer confidence figures disappointed, as did US new home sales, prompting a sell off of the US currency.

The US dollar index has continued to rise overnight, making new 3 month highs, after data showed that sales of existing U.S. homes rose more than forecast in November.

The US dollar has continued its rise overnight as 10 year US treasury yields hit their highest levels since August, pushing above 3.7%.

After posting its highest levels for 3 months at 77.94 the dollar index has slipped back in Asia trading on profit-taking, and news that a report due to be published today will forecast that business confidence in Germany rose to the highest level since July 2008.

The US dollar index continues to push higher hitting its highest levels since early September as the risk aversion trade returns with a vengeance. The dollar index has posted a high of so far of 77.85 with the Euro suffering the most on investor fears about the level of debt contagion in the Euro zone.