TOKYO–The US dollar hovered on Tuesday just above a one-week low reached overnight versus major peers as markets reduced the odds of a percentage-point Federal Reserve rate hike this month.
Bets for supersized easing ramped up last week after data showed US inflation, already at a four-decade high, continued to accelerate in June. But some Federal Reserve officials were quick to throw cold water on such talk, and figures from Friday showed a easing of consumer inflation expectations to the lowest in a year.
Traders in futures contracts tied to the Fed’s short-term federal funds policy rate, who had been leaning toward a full-percentage-point rise in interest rates, shifted their bets firmly in favour of a 0.75-percentage-point increase at the upcoming meeting, with the odds last seen at about 81 percent.
The dollar index – which gauges the greenback against six counterparts – was flat at 107.47. That was off Monday’s low of 106.88 but also well back from the high of 109.29 last week, a level not seen since September 2002.
The euro, which is the most heavily weighted currency in the dollar index, slipped 0.08 percent to $1.01355, but that came after putting on around 0.6 percent overnight for a second day of strong gains.
The common currency slid as low as $0.9952 on Thursday for the first time since December 2002, pressured by uncertainty about a potential energy supply crunch in the euro zone.
Traders are biting their nails ahead of Thursday, when gas is supposed to resume flowing through the Nord Stream pipe from Russia to Germany after a shutdown for scheduled maintenance.
