TOKYO- The dollar languished near the bottom of its recent range against major peers on Tuesday, knocked back by weak US factory data overnight and on market wagers of faster normalization of monetary policy in other countries.
The dollar index, which measures the greenback against six peers, weakened 0.05 percent to 93.894 from Monday. It has oscillated for the past three weeks between 93.671 and the one-year high of 94.563, reached last Tuesday.
Over the past week though, it has trended lower, with a tapering of Federal Reserve stimulus as early as next month already priced in, along with a first interest-rate increase next year.
A recovery in risk sentiment has also weighed on the safe-haven US currency.
Elsewhere, Bank of England Governor Andrew Bailey sent a fresh signal for early U.K. rate hikes by saying on Sunday that the central bank will “have to act” to counter rising inflation risks. In New Zealand, bets for faster policy normalization were stoked on Monday by data showing the fastest consumer-price inflation in more than a decade. read more
The U.K. and New Zealand led a rise in short-term bond yields globally, with rates in Europe and Australia climbing comparatively more than those in the US, pressuring the dollar.
“The sense that ‘transitory’ inflation will last longer than previously thought has been the main catalyst” as “the market re-calibrated rate hike expectations in most jurisdictions,” Westpac strategists wrote in a research note.
