The Dollar Catches a Breath Before The Fed’s Testimony

The US dollar paused for breath on Tuesday, as traders awaited testimony by Federal Reserve Chairman Jerome Powell for more guidance on the recent sudden shift in central bank policy expectations.

The dollar has made significant gains since the Federal Reserve indicated last week to raise interest rates earlier than expected, but it fell yesterday, giving up a small part of the gains.

Against the euro, the dollar suffered a loss of about 0.4% last night to settle around $1.1909.

The US currency rose against its Japanese counterpart to 110.42 yen, while the dollar index settled at 91.965, after losing about 0.5% on Monday.

The Australian and New Zealand dollars fell after recovering yesterday from their lowest level in several months, the Australian currency fell 0.4% to $ 0.7511, and the New Zealand dollar fell 0.1% to $ 0.6980.

In the medium term, investors will focus closely on the US labor market, whose performance is likely to influence the direction of the Fed.

In the short term, all eyes are on Powell, who will testify before Congress by 1800 GMT.

In prepared comments, Powell noted the continued improvement in the labor market and the recent rise in the inflation rate.