Hot Now: Dollar near three-week high

LONDON: The dollar held near a three-week high on Wednesday against a trade-weighted basket of its rivals as strong U.S. retail sales data boosted risk appetite, though markets were wary of chasing gains due to lurking geopolitical risks.

"The North Korea missile fears seems to be abating for now and if the recent bunch of strong U.S. data translates into higher inflation, then markets will start pricing more interest rate increases from the Fed in the coming months," said Ulrich Leuchtmann, an FX strategist at Commerzbank in Frankfurt.

The dollar index edged higher to 93.86 and was consolidating most of its overnight gains when it hit its highest level since July 26 at 94.14 in the previous session.

U.S. retail sales jumped 0.6 percent in July, handily beating economists´ estimate of a 0.4 percent reading, to post their biggest gain in seven months as consumers bought more cars and increased discretionary spending.

But despite the strong data, interest rate expectations remain broadly unchanged with markets expecting the Federal Reserve to raise rates only once over the next 12 months, according to the CME´s Fedwatch tool.