The dollar faced pressure on Tuesday due to profit-taking and some support for the yen amid ongoing efforts by Japanese officials to maintain its value. The New Zealand dollar and the British pound both recovered from recent lows against the greenback.
With limited economic data scheduled for the week, investors are awaiting Friday's release of the Federal Reserve's preferred inflation gauge, which could influence U.S. interest rate expectations. The core personal consumption expenditures (PCE) price index is expected to show a 0.3% increase in February, keeping the annual rate at 2.8%.
Market analyst Tony Sycamore noted that Fed Chair's efforts to temper aggressive rate hike expectations could be challenged if the inflation figure exceeds 3%, suggesting a bumpier path ahead for monetary policy.
Last week's central bank meetings led to a reevaluation of global rate outlooks, briefly pushing the dollar higher against major currencies. While the Fed maintained its projection of three rate cuts this year, other central banks hinted at potential easing measures.
According to Thierry Wizman, global FX strategist at Macquarie, the dollar's strength is supported by superior U.S. economic growth compared to other regions. However, it faces resistance amid concerns of dovishness from other central banks.
On Monday, Fed officials acknowledged heightened caution regarding inflation slowdown in the U.S., contributing to slight dollar weakness. The dollar index edged down to 104.20, while the euro saw a modest increase to $1.0840. The Australian dollar stabilized at $0.6540.
In Japan, the dollar declined slightly against the yen to 151.37, facing resistance near the 152 level due to potential intervention from Japanese authorities. Finance Minister Shunichi Suzuki emphasized readiness to address yen weakening, echoing previous warnings.
The yen's decline following the Bank of Japan's rate hike reflects market focus on interest rate differentials between Japan and other major economies, particularly the U.S. Local authorities expressed concerns over the yen's slide, despite fundamentals suggesting otherwise.
Elsewhere, the offshore yuan strengthened against the dollar, supported by suspected intervention from Chinese state-owned banks and strong official guidance, buoying the onshore market.
Paraphrasing text from "Investing" all rights reserved by the original author.
