On Monday, the dollar hit a three-week low amid increased expectations that the U.S. central bank would soon end its monetary tightening campaign.
In afternoon forex trading, the dollar index lost 0.3 percent to 101.98. Analysts explained that remarks by U.S. Federal Reserve officials, led by San Francisco Fed President Mary Daly, caused investors to expect the agency to make a policy pivot in the coming months.
Fed fund futures still predict a 25-basis-point increase by the Fed in the policy meeting later this month. In June, the central bank decided to forego a rate hike, stressing the need to monitor the impact of its rate hike campaign on the country’s overall economy. Recent Fed meeting minutes revealed that in June’s meeting, several officials had voted for further rate increases.
The euro jumped to $1.0997, the highest in three months. The currency rose by 0.2 percent to $1.0995 later in the session.
Sterling gained 0.3 percent in Asian forex trading on Tuesday local time, hitting a 15-month peak of $1.2899. Recent official data reveals that British wages rose 7.3 percent year-over-year in the quarter ending May. Analysts earlier predicted the quarterly wage inflation would stand at 7.1 percent on an annual basis.
Against the Japanese yen, the dollar declined to 141.32, the lowest since late June. On Friday, the dollar plummeted by almost 1.3 percent after the U.S. nonfarm payroll data reported 209,000 additional jobs in June.
The Norwegian crown strengthened against the greenback and the euro following the country’s latest inflation data. The U.S. dollar fell by one percent to 10.493 against the crown, while the euro shed almost one percent to 11.5363.
Following economic data from China, the U.S. dollar traded flat against the Chinese yuan in offshore trading at 7.230. On Monday, the Chinese government reported that factory-gate prices declined at the fastest rate in more than seven years last month. Meanwhile, consumer prices rose at the slowest pace in almost two years.
The data from China, however, dragged the Australian dollar on Monday. The Aussie posted a 0.2 percent loss to $0.6677 against the greenback. Meanwhile, the New Zealand dollar gained 0.1 percent to trade at $0.6215, reversing losses from prior sessions.
“The weaker pressure on the dollar has … been hard to square from a relative rates and growth standpoint,” said Wells Fargo macro strategist Erik Nelson.
“U.S. growth has outperformed expectations, while Europe and China have underperformed. I think the U.S. economy is stronger than we give it credit for.”
Erik Nelson, Macro Strategist at Wells Fargo
Commodity updates
Gold traded sideways on Monday as investors anticipated the U.S. consumer price data due Wednesday. Spot gold traded at $1,925.30 an ounce in the afternoon, while the U.S. gold futures declined by 0.1 percent to $1,931.
Kitco senior analyst Jim Wyckoff said gold had a “strong chart support” at $1,900. However, strong inflation data may push the commodity price to $1,848. Higher interest rates reduced the appetite for gold trading because the commodity paid no interest.
On the same day, palladium recorded a 0.2 percent drop to trade at $1,241.41 an ounce. Earlier in the session, the commodity traded at $1,190.65. Palladium price has declined by almost 31 percent this year. Analysts at metal company Heraeus said palladium sales in the U.S. would continue to decline if the Fed decided to prolong its tightening campaign.
Silver strengthened by 0.4 percent to trade at $23.14, while platinum gained two percent to $926.55 an ounce.