The U.S. dollar index traded flat at 103.77 in Asian time after a 0.17% decline on Monday
The dollar traded on the back foot on Tuesday, as markets looked ahead to a week of U.S. economic data that will provide new hints on how soon the Fed may begin reducing interest rates.
The U.S. dollar index, which measures the currency against a number of rivals including the euro and yen, traded flat at 103.77 in Asian time, after a 0.17% decline on Monday.
Markets have all but ruled out a reduction at the Fed’s March meeting and have recently pushed back expectations for a cut to June from May, according to CME’s FedWatch Tool, following strong U.S. consumer and producer price data.
U.S. durable goods data is due later on Tuesday, while January’s U.S. personal consumption expenditures (PCE) index, which is the Federal Reserve’s preferred gauge of inflation, will be released on Thursday.
A still softish DXY does not quite convey the USD’s story right here and, if anything, key upcoming event risk can potentially fuel another leg up, Westpac’s head of FX strategy, Richard Franulovich, stated in a note.
The bulk of DXY’s gains this year have unfolded over just a handful of marquee sessions, and outside that it has been decidedly consolidative, he added. The lacklustre DXY in recent days looks mostly like a continuation of that profile.
The dollar slid 0.13% to 150.485 yen, as Japan’s currency strengthened after the release of data showing consumer inflation stayed at the BoJ’s 2% target, instead of dropping below it for the first time in around two years, as economists had forecast.
The euro was unchanged at $1.08505, following a 0.27% gain in the earlier session.
Risk-sensitive antipodean currencies dipped amid a drop in regional equities, continuing a decline from multi-week highs.
The Australian dollar shed 0.2% to $0.6528, after hitting a three-week high of $0.6595 on Thursday.
The kiwi eased 0.3% to $0.61555, after hitting the highest since January 15 at $0.6218 on Thursday.
Traders are bracing for what could turn out to be a significant policy meeting by the RBNZ on Wednesday. Markets are pricing in a one-in-three probability the RBNZ will hike its 5.5% official cash rate to tackle inflation.
