TOKYO- The US dollar hovered near a 4-1/2-month peak against major peers on Tuesday as traders rushed to push back bets for the Federal Reserve’s first interest rate cut this year.
The dollar renewed a six-week high versus the euro and was on the cusp of doing the same against sterling, after US data from Monday unexpectedly showed the first expansion in manufacturing since September 2022.
Fears of intervention by Japanese officials slowed the dollar’s gains against the yen, however, even as long-term US Treasury yields – which the currency pair tends to track – jumped to a two-week top overnight.
Gold, which performs best when yields are falling, found its feet after getting knocked back from a record peak on Monday.
The US rate futures market now factors in 61.3 percent odds of a Fed rate cut in June, down from about 70.1 percent probability a week ago, according to the CME’s FedWatch tool.
“The divergence of solid growth dynamics for the US and waning Fed rate cut risk against sluggish growth for other FX majors suggests that any DXY dips should be seen as buying opportunities,” said Westpac’s head of currency strategy, Richard Franulovich, referring to the dollar index.
“Targets in the 106 region look feasible from here,” for the dollar index, with 104.50 acting as support, he said.
The dollar index which measures the currency against the yen, euro, sterling and three other peers, edged 0.05 percent higher to 105.05, after earlier reaching 105.07, matching the high from Monday.
The euro slipped 0.08 percent to $1.07335, after dipping as low as $1.07295. Sterling was 0.04 percent lower at $1.25455 after sliding to $1.2541, just above the low of $1.2540 from the prior session.