SINGAPORE- The US dollar languished near a seven-month low against other major currencies on Tuesday, as investors took heart that the Federal Reserve may be nearing the end of its rate-hike cycle and as China’s reopening drove demand for riskier assets.
Markets have grown increasingly doubtful that the Fed will have to take interest rates above 5 percent to cool inflation, as effects of it aggressive rate increases last year have already been felt in the economy. Investors are now expecting rates to peak just under 5 percent by June.
Last week’s jobs report showed that while the US economy had added jobs at a solid clip in December, it had also recorded a slowdown in wage growth.
The dollar’s decline pushed the euro to a seven-month peak of $1.07605 in the previous session. The euro was last 0.04 percent lower at $1.0728.
Sterling slipped 0.03 percent to $1.2177, after similarly hitting a three-week top of $1.2209 on Monday and ending the session 0.73 percent higher.
Against a basket of currencies, the US dollar index edged 0.04 percent higher to 103.21, after tumbling 0.7 percent and touching a seven-month low of 102.93 in the previous session.
“The dollar’s big climb down has begun,” said George Saravelos, head of FX research at Deutsche Bank.
China’s rapid reopening also provided another boost towards riskier assets away from the safe haven greenback, with the risk-sensitive Aussie spiking to a more than four-month peak of $0.6950 in the previous session. It was last 0.04 percent lower at $0.6911.
The kiwi steadied at $0.6373, not far off Monday’s more than three-week high of $0.6411. Both antipodean currencies are often used as liquid proxies for the Chinese yuan.
