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The dollar settled below a two-and-a-half-week high on Tuesday, September 14th, hit in the previous session, as investors braced for inflation data that may provide indications of the timing of the US Federal Reserve’s policy tightening at its meeting next week.
Ahead of the US central bank’s policy review scheduled for September 21-22, investors are closely following US consumer price data due today at 12:30 GMT.
Economists expect core consumer price inflation, which excludes volatile food and energy, to rise by 0.3% in August compared to July.
Bets on the dollar’s rise have risen rapidly in recent weeks, and last week it reached its highest level since March 2020, as rising inflation readings raised bets that policymakers will withdraw their stimulus during the Covid-19 pandemic earlier than expected.
Against a basket of competing currencies, the dollar index settled at 92.59, after retreating from 92.887, which it reached on Monday.
The euro traded at $1.1815, after rebounding from Monday’s low of $1.17705, its lowest since August 27.
Calm prevails in the currency markets in morning trading, while a measure of broader market volatility holds at its lowest levels for 2021.
The only source of enthusiasm in the currency markets was the Australian dollar, as the Australian currency fell to its lowest level in two weeks after the head of the country’s central bank ruled out taking the market into consideration of interest rate increases in 2022 and 2023.
The Australian dollar extended losses to drop more than 0.5%, falling to $0.7336 as Reserve Bank of Australia Governor Philip Lowe painted a very accommodating picture of the policy outlook with no interest rate hike in sight until 2024.
Although global stock markets rebounded on Monday after falling last week, some analysts are also warning of a growing risk appetite.
In cryptocurrencies, bitcoin fell to $43,400, its lowest in nearly a week, and last settled at $45,395, while Ether was trading at $3,307.
