Dollar suffers losses as US interest rates reach their peak

The dollar faced pressure on Tuesday and was trading at multi-month lows against the euro and other major currencies at a time when investors expect US interest rates to fall next year and see this as a signal to sell the dollar as a hedge.

Movements were modest in early Asian trading, but the dollar index fell from its 200-period moving average on Monday as a rise in the Chinese yuan led to another round of significant declines for the US currency.

The dollar index, which measures the performance of the US currency against a basket of six major currencies, fell 1.9 percent last week in conjunction with a significant rise in US Treasury bond yields, and lost another 0.5 percent overnight to reach 103.44 points.

The euro touched a three-month high of $1.0952 on Monday thanks to limited help from European Central Bank Governing Council member Pierre Wunsch, who disputed market expectations of an April interest rate cut.

The yuan hit a three-month high against the dollar on Monday, thanks to the policies of the Chinese central bank. The Australian and New Zealand dollars also rose against the US currency.

In weak external trading on Tuesday morning, the yuan rose and maintained its gains at 7.1640 to the dollar.

The Australian dollar rose slightly to $0.6561, slightly below the three-month high recorded on Monday at $0.6564.

The New Zealand dollar settled at $0.6040.

Even the yen rose to a seven-week high of 148.1 to the dollar overnight and settled at $148.3 on Tuesday.