Kevin Backlund
TOKYO (Reuters) – The dollar edged up in foreign exchange markets on Tuesday as traders awaited a key U.S. retail sales figure and comments from Federal Reserve officials to better gauge the timing and pace of interest rate cuts.
The US dollar index against the euro, pound, yen and three other major currencies rose 0.11% to 105.39 during Asian trading hours.
It was down 0.2% on Monday, down from Friday’s 1-1/2-month high of 105.80.
The dollar is being pulled in both directions by benign U.S. inflation data and a generally more hawkish tone from Fed officials at their policy meeting last week, lowering their previous median forecast of three quarter-point rate cuts this year to one.
Instead, the dollar index’s rise was mainly due to a sharp drop in the euro after French President Emmanuel Macron shocked French President Emmanuel Macron by calling early elections last week following his ruling centrist party’s crushing defeat in European Parliament elections to Marine Le Pen’s euroskeptic National Rally.
“The data coming out of the U.S. suggests a shift in Fed policy, even as officials scale back their expectations of a rate cut,” said Rodrigo Catril, senior currency strategist at National Australia Bank.
“The dollar’s safe-haven appeal is supporting it at the moment,” Catril added, predicting the index will remain in its recent 104-106 range for the time being.
Philadelphia Fed President Patrick Harker made clear on Monday that he is in favor of a single rate cut, but left open the possibility of changing his view depending on upcoming data.
A number of Federal Reserve officials, including Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin, are scheduled to take to the podium at various venues later in the day.
The dollar was little changed at 157.675 yen on Tuesday.
The euro fell 0.12% to $1.0721, paring a 0.26% gain from the previous day, while the pound was down 0.07% to $1.2696.
The euro has stabilized somewhat this week after Le Pen suggested she would not pursue extreme fiscal policies if in power and did not want Macron to step down.
“It is becoming clear that a hung parliament is the market’s base case scenario and sober minds would argue that a government involving Le Pen’s RN party is unlikely to shake up the fiscal situation significantly,” said Chris Weston, head of research at Pepperstone.
“Le Pen must win the 2027 presidential election, but she can only do that if her party wins the respect of the bond market.”
Meanwhile, the Australian dollar was little changed at $0.66115, unfazed by the Reserve Bank of Australia’s expected decision to keep interest rates unchanged on Tuesday.
“The RBA’s position is well communicated – they are taking a wait-and-see approach until they have more data on inflation,” NAB’s Catrille said.
“It’s not surprising that Australians have responded so mutedly.”
New Zealand’s kiwi dollar fell 0.27% to $0.61145.
Among cryptocurrencies, Bitcoin fell about 1% to $65,725, having earlier hit a one-month low of $64,569.70.
(Reporting by Kevin Buckland; Editing by Shri Navaratnam and Kim Coghill)
