Dollar is recovering from its lowest level in three months

The dollar rose on Wednesday after falling to its lowest level in more than three months on hopes that the Federal Reserve will cut interest rates soon.

The New Zealand dollar was one of the best performing currencies, rising 0.49 percent to $0.6166 after the Reserve Bank of New Zealand on Wednesday kept interest rates unchanged but warned that there may be a need to tighten monetary policy further.

The New Zealand dollar rose more than 1 percent earlier in the session to a four-month high of $0.6207.

Comments by Federal Reserve official Christopher Waller, which indicated a possible interest rate cut in the coming months, led to a decline in US bond yields and a decline in the dollar on Tuesday.

The dollar index, which measures the currency’s performance against six currencies, hit its lowest level since early August at 102.46.

Then it reduced some of its losses and rose in the latest trading by 0.12 percent to 102.73. The dollar is on track to fall 3.7 percent in November, its largest monthly decline in a year.

The euro briefly exceeded $1.10 for the first time since August on Tuesday, but pared its gains, settling at $1.0991.

Inflation data from Spain and the German state of North Rhine-Westphalia showed that price pressures in the euro zone continued to ease in November.

The Eurozone inflation rate is scheduled to be announced on Thursday, ahead of the US Personal Consumption Expenditures (PCE) data, the Federal Reserve’s preferred measure of inflation.

The Japanese yen, which is highly sensitive to US bond yields, held on to its recent gains on Wednesday. There was little change in the dollar at 147.37 yen, after it had previously fallen to its lowest level in more than two months at 146.68 yen.

The Chinese yuan ended local trading at 7.1246 to the dollar, the strongest close since June 16.