The dollar was little changed against a basket of currencies on Tuesday as investors awaited US retail sales and minutes from the Federal Reserve’s July meeting on Wednesday.

The dollar rebounded from a six-week low last week as investors increased bets that the US central bank will continue to raise rates aggressively as inflation remains persistently high.

However, trading was choppy as the Fed was not due to meet until September 20-21, before which additional data on consumer price inflation and jobs are due.

Easing financial conditions As the benchmark 10-year Treasury yield remains below 3% and speculation has increased as credit and stock markets improve, the Fed may need to tighten more aggressively to deal with rising price pressures.

“Every rally in U.S. stocks gives the Fed more leeway to raise rates,” said Adam Button, chief currency analyst at Forex Live in Toronto.

ING analyst Padraic Garvey noted that financial conditions have returned to where they were in April, which was before the Fed raised rates by 200 basis points, leaving the US central bank almost on top.

“It should be canceled. Otherwise, the Fed has no choice but to tighten,” said Harvey, regional head of Americas research at ING.

Investors will be looking to the minutes of the Fed’s July meeting on Wednesday for new signals on how likely a September rate hike will be.

Fed futures traders currently estimate a 60% chance of a 50 basis point hike and a 40% chance of a 75 basis point hike.

U.S. retail sales data on Wednesday will also provide new insights into consumer sentiment. Sales are expected to have risen 0.1% in July from June.

U.S. homebuilding fell to the lowest level in nearly 1-1/2 years in July, weighed down by higher mortgage rates and the cost of building materials, data released Tuesday showed.

Meanwhile, industrial production rose to an all-time high in July.

The dollar index against a basket of currencies rose by 0.02% to 106.48.

The euro climbed back into positive territory after falling earlier on data showing that German investor sentiment eased slightly in August on concerns that rising living costs would weigh on private consumption.

Europe is grappling with an energy crisis following the imposition of sanctions against Russia over its invasion of Ukraine.

Germany on Tuesday secured a commitment from major gas importers to maintain full supply of two floating liquefied natural gas (LNG) terminals from this winter in a bid to reduce dependence on Russian fuel as Moscow warned that gas prices could rise again.

“The market is slowly pricing in a worse outcome this winter in Europe, and that’s the main reason the dollar remains so strong,” Button said. “While the U.S. outlook is deteriorating, it still looks better than Europe and much of Asia.”

The euro rose 0.10% against the dollar to $1.0169 after earlier falling to $1.0121, its lowest since Aug. 3.

The dollar rose by 0.69% against the yen to 134.22 yen.

The Japanese currency, which is often affected by the difference between benchmark yields in the United States and Japan, rose last week on expectations that lower U.S. inflation would mean a less aggressive pace of Fed tightening and thus lower U.S. yields.

However, in recent days, several Fed officials have signaled the need for further rate hikes.

The Australian dollar recovered from earlier losses and was little changed on the day.

Minutes from the Reserve Bank of Australia’s (RBA) August policy meeting on Tuesday showed that the Reserve Bank of Australia still sees the need to raise interest rates further to prevent high inflation, which fits in with expectations but is off track and aims to keep the economy at a uniform level.

The New Zealand dollar fell 0.34% on concerns about global growth.

New Zealand’s central bank is expected to raise rates by half a point for the fourth time in a row on Wednesday, but it looks like that has already been priced into the currency.

The greenback fell 0.43% against the Canadian dollar after Canadian data showed core inflation pressures remained strong and raised bets for a significant rate hike by the Bank of Canada next month.

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