The greenback rose against majority of its peers after initially falling to a near 1-month low as tensions between U.S. and China triggered broad-based risk-averse buying in usd. Meanwhile, Fed officials hinted more rate hike in order to tackle the continuing inflationary pressures.
Reuters reported U.S. House of Representatives Speaker Nancy Pelosi was expected to arrive in Taipei later on Tuesday, people briefed on the matter said, as several Chinese warplanes flew close to the median line dividing the Taiwan Strait. China has repeatedly warned against Pelosi going to Taiwan, which it claims as its own, and the United States said on Monday that it would not be intimidated by Chinese “sabre rattling” over the visit.
Further updates from Reuters, the U.S. Federal Reserve could raise interest rates by half a percentage point at its next policy meeting in September if high inflation does not improve and a 75 basis point hike could also be on the table, Chicago Fed President Charles Evans said on Tuesday. “If you really thought things weren’t improving…50 (basis points) is a reasonable assessment but 75 could also be okay. I doubt that more would be called for,” Evans told reporters during a question and answer session at the regional bank’s headquarters in Chicago, effectively dismissing a full percentage point move.
Versus the Japanese yen, although dollar dropped to a fresh 7-week trough at 130.41 in Asian morning on safe-haven buying in jpy, price erased its losses and rallied to session highs at 133.18 near New York close on rally in US yields due to hawkish comments by Fed officials.
The single currency jumped to session highs at 1.0293 at Asian open, however, price met renewed selling there and tumbled to 1.0216 in early European morning on safe-haven usd buying due to U.S.-China tension. The pair then ratcheted lower to an intra-day low at 1.0164 near New York close due partly to cross-selling in euro especially vs sterling.
The British pound also met renewed selling at 1.2279 at Asian open and fell to 1.2187 in European morning on safe-haven usd buying. The pair then rebounded briefly to 1.2240 in New York morning before falling to session lows at 1.2158 near New York close after hawkish Fed speak.
Data to be released on Wednesday:
Australia AIG construction index, S&P Global services PMI, retail sales, New Zealand employment change, unemployment rate, labor costs index, Japan Jibun bank services PMI, China Caixin services PMI, Germany exports, imports, trade balance, current account, S&P Global services PMI, Swiss CPI, France budget balance, S&P Global services PMI, Italy S&P Global services PMI, retail sales, EU S&P Global services PMI, producer prices, retail sales, UK S&P Global services PMI, U.S. MBA mortgage application, S&P Global services PMI, durable goods, durable ex-defense, durable ex-transport, factory orders and ISM non-manufacturing PMI.