On Tuesday, the US dollar faced downward pressure as market attention turned to a week of crucial US economic data, offering insights into the potential timing of the Federal Reserve's interest rate cuts.
The yen strengthened marginally following reports indicating that consumer inflation in Japan maintained the Bank of Japan's 2% target, avoiding a dip below for the first time in nearly two years, contrary to economists' forecasts.
During early Asian trading hours, the US dollar index, which gauges the currency against a basket of counterparts including the yen and euro, remained unchanged at 103.78, following a 0.17% decline on Monday.
Market expectations have largely dismissed the possibility of a rate cut at the Fed's March meeting. According to CME's FedWatch Tool, projections for a rate cut have been pushed back from May to June after robust US consumer and producer price data.
Later on Tuesday, the market awaits US durable goods data, while the US personal consumption expenditures price index for January, the Fed's preferred inflation measure, is set to be released on Thursday.
Westpac's head of FX strategy, Richard Franulovich, noted in a statement, "The dollar index's recent softness doesn't fully capture the USD's current narrative. Key upcoming events could potentially drive another upward move."
"The majority of the dollar index's gains this year have occurred in just a few notable sessions, and overall, it has been consolidative," he added. "The recent lackluster performance of the dollar index appears to be a continuation of that pattern."
The Australian and New Zealand dollars saw declines, with the Aussie dropping 0.1% to $0.6533 and the kiwi slipping 0.2% to $0.6161.
Traders are anticipating a significant policy meeting by the Reserve Bank of New Zealand (RBNZ) on Wednesday, with markets indicating a one-in-three chance of a 5.5% official cash rate increase to combat persistent inflation.
Cryptocurrency bitcoin maintained a level above a two-year peak of $54,969, buoyed by the announcement that enterprise software firm MicroStrategy Inc had acquired around 3,000 more tokens.
Against the Japanese yen, the dollar fell 0.1% to 150.54 as a slightly higher-than-expected reading for Japan's January consumer price index (CPI) suggested the Bank of Japan could exit negative interest rate policy as early as next month.
The euro remained relatively stable at $1.0847, and sterling showed no significant change at $1.26825.
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