Dollar wobble near one-year low; euro jumps to 17-month peak

July, 18(Agencies) — US dollar trembled near an over one-year low against its major peers on Tuesday, as investors awaited fresh catalysts to gauge if the greenback has further downside in the wake of last week’s cooler-than-expected US inflation report.
US dollar index, which measures the greenback against a basket of six currencies, dipped slightly to 99.84 in early Asia trade, after having tumbled to its lowest since April 2022 on Friday.
The index also clocked its worst week of 2023 last week, after data showed US inflation subsided further with consumer prices registering their smallest annual increase in more than two years, taking pressure off the Federal Reserve to continue raising interest rates.
“I think the dollar can stay under selling pressure,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia. “Markets are focused on the end of the FOMC tightening cycle.”
Against the greenback, the euro hit a fresh 17-month high of $1.1256, while sterling gained 0.15% to $1.3094, not far from last week’s top of $1.3144, also its highest since April 2022.
Money markets have largely priced in a 25-basis-point rate hike from the Fed at its policy meeting later this month, though see rates coming down as early as December.
Conversely, investors expect the European Central Bank and the Bank of England to have further to go in their rate-hike cycle.
Elsewhere, the Japanese yen rose marginally to 138.66 per dollar and remains more than 4% clear of a seven-month low it hit last month.
Bank of Japan (BOJ) holds its monetary policy meeting next week, with investors on the lookout for whether the central bank will start phasing out its ultra-dovish policy stance.
“More market participants have priced in chances of BOJ widening its yield curve control policy’s trading band by 25 bps in the next meeting,” said Ryota Abe, an economist at SMBC.
Australian dollar pared some earlier gains after minutes of the Reserve Bank of Australia’s July policy meeting showed the decision to keep interest rates on hold came as policy was clearly restrictive.

Economic Affairs