TOKYO- TheUS dollar nursed its wounds on Tuesday following its biggest drop in nearly three weeks against major peers, as Federal Reserve policymakers allayed investor fears of a very rapid tightening of monetary policy.
The Australian dollar remained firm after its biggest jump in eight months overnight ahead of a Reserve Bank of Australia policy decision later on Tuesday, with expectation building that Governor Philip Lowe will capitulate on his prior conviction that an interest rate rise this year was unlikely.
The dollar index, which measures the greenback against six rivals, ticked 0.05 percent higher to 96.715, barely making a dent in Monday’s 0.59 percent tumble. It was at an almost 19-month high of 97.441 at the end of last week, as investors pondered chances the Fed could raise rates by 50 basis points in March.
Trading in Asian hours may be subdued with several markets on holiday for the Lunar New Year.
A chorus of Fed officials on Monday backed a lift-off in rates in March, but spoke cautiously about what might follow.
Money markets price in a quarter-point rise for March, and four more by year-end.
“Recent Fed remarks appeared to push back on the odds of a 50bp rate hike in March,” putting the focus on economic data this week for clues on the pace of policy tightening, including the closely watched monthly payrolls report on Friday, TD Securities strategists wrote in a note.
