Against the dollar, the New Zealand dollar bounced back from a four-month trough and last bought $0.5999
The dollar was on the back foot on Tuesday, owing to profit taking and pressured in part by a marginally stronger yen as Japanese government officials continued with their efforts to defend the currency.
Against the greenback, the New Zealand dollar bounced back from a four-month trough and last bought $0.5999, and likewise for sterling which strengthened to $1.2636, away from last week’s one-month low of $1.25755.
With a comparatively light economic data calendar for the week, the market focus turns to the release of the Fed’s favoured inflation measure on Friday, which could guide the path of the U.S. interest rate outlook.
The U.S. core PCE price index is seen rising 0.3% in February, which would keep the annual pace at 2.8%.
The Fed Chair has tried to push the market away from aggressive interest rate expectations at the start of this year and he has always been maintaining the idea that it was going to be a bumpy path, according to Tony Sycamore, a market analyst at IG.
But a print of 3% annually or greater would certainly create a lot of concern that maybe the bumpy path is going to be bumpier than expected, he added.
A shift in the global rate outlook after a slew of central bank meetings last week had pushed the dollar to a one-month high against its major rivals.
It is tough for the dollar to sustain any weakness with a backdrop in which U.S. growth outstrips growth in the rest of the world, according to Thierry Wizman, global FX and rates strategist at Macquarie. But it is even tougher for the dollar to weaken when other central banks were sounding more dovish than a dovish Fed.
Fed officials had on Monday acknowledged an increased sense of caution around the pace of slowdown in inflation in the world’s biggest economy.
The dollar index was down 0.02% at 104.20, while the euro gained 0.03% to $1.0840.
The Aussie steadied at $0.6540.
