The dollar hovered near a two-month high on Tuesday, supported by volatile oil prices and a sharp rise in Treasury yields, although gains were limited as traders awaited US economic data due later this week for clues on the path of interest rates.
The euro traded near a three-month low at $1.1367 after the European Central Bank president signaled a measured approach to containing inflation. Sterling was steady at $1.3248, also remaining close to a three-month low.
The dollar index, which measures the US currency against a basket of major currencies, edged up to 101.2 and was on track for a 1.8% gain this month, its strongest monthly performance since June.
Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia, said the dollar’s gains were limited for now as investors awaited US data later in the week. Markets have also gradually become less sensitive to oil price movements, while a global bond sell-off has weakened some of the support the dollar had received from rising Treasury yields.
“We are likely to get stronger US economic data showing the US economy outperforming, and I think that will help lift US interest rates relative to other countries and support the dollar,” Capurso said.
US economic data due later this week, including the personal consumption expenditures price index on Wednesday and nonfarm payrolls on Friday, are expected to influence expectations over whether the Federal Reserve will raise interest rates again.
The CME FedWatch tool shows markets currently pricing in a more than 70% probability of a US rate hike by the end of October, up from 57% a week earlier.
The Reserve Bank of Australia is widely expected to raise its benchmark interest rate later on Tuesday. The Australian and New Zealand dollars were each down 0.1%, trading at $0.7013 and $0.5660, respectively.
The Japanese yen edged down to 157.40 per dollar, giving up most of Monday’s gains after Atsushi Mimura, Japan’s vice finance minister for international affairs, said markets should take seriously the “very clear” warning issued by Tokyo and Washington last week regarding the yen. The comments heightened traders’ concerns over the risk of official intervention.
The offshore yuan was little changed at 6.71 per dollar after last week’s three-day summit between US President Donald Trump and Chinese President Xi Jinping produced limited results.
Source: Reuters
