The dollar index gained 0.1% to 100.82 after rising 0.3% on Monday
The U.S. dollar firmed against its major peers on Tuesday after Fed Chair Jerome Powell pushed back against bets on more supersized interest rate cuts.
The yen steadied near the middle of its range against the dollar over the past month, after a volatile two days as traders awaited Japan’s incoming prime minister and his cabinet.
Australia’s dollar rose towards Monday’s high after upbeat domestic retail sales data.
Powell adopted a more hawkish tone in a speech at a conference in Tennessee (U.S.), saying the central bank would likely stick with quarter-percentage-point interest rate cuts moving forward.
This is not a committee that feels like it is in a hurry to cut rates quickly, he said.
Traders remain certain that the Federal Reserve will cut again at the next policy setting meeting in November, but slashed expectations for a 50 bps cut to 35.4% from 53.3% a day earlier, as per CME Group’s FedWatch Tool.
“The door has not been closed on a 50 bps cut, because if economic data tumbles then such a cut is warranted. But Powell clearly thinks markets are overly excited” about upcoming cuts, said Matt Simpson, senior market analyst at City Index.
The Federal Reserve started its easing cycle with a larger-than-expected half-point cut last month.
Powell’s speech came ahead of a heavy week of U.S. data, including the Institute for Supply Management’s (ISM) manufacturing index later on Tuesday and non-manufacturing report on Thursday, followed by Friday’s potentially crucial monthly jobs figures.
If the ISM non-manufacturing data and jobs report come in above expectations again this month, the dollar could see a “decent bounce” higher before eventually resuming its downturn, said Simpson.
The dollar index gained 0.1% to 100.82 as of 0403 GMT, after rising 0.3% on Monday.
The dollar added 0.45% to 144.27 yen , after whipsawing from as high as 146.495 yen on Friday to as low as 141.65 yen on Monday.
The euro traded not far from Monday’s one-week low following a drop in German inflation to the lowest since early 2021, boosting speculation about another rate cut this month.
The euro was mostly unchanged at $1.113575 after dropping as low as $1.1113 in the earlier session.
