NEW YORK: The dollar hit its lowest level in more than three-weeks against a basket of currencies on Tuesday, as investors awaited U.S. jobs figures later this week for insight into the possible path of U.S. Federal Reserve monetary policy.
Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
The greenback has struggled since Federal Reserve Chair Jerome Powell’s said at the Jackson Hole conference on Friday that tapering could begin this year, but the central bank was in no hurry to raise interest rates.
“If the payrolls number disappoints, then Eurodollar has another excuse to trade higher again because that is going to bring out all the doves again saying the Fed is not going to taper in September,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada in Toronto.
The dollar briefly pared some of its decline on the session after the S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas showed U.S. single-family home prices rose in June from the prior year at the fastest pace on record.
Choppiness for the greenback ensued as a weaker-than-expected Chicago PMI for August saw the dollar trim its decline, only to once again dip after the Conference Board’s reading for consumer confidence fell short of expectations.
Investors will look to a round of U.S. data later this week to gauge the strength of the labor market, culminating with payrolls numbers due Friday, in an effort to determine when the Fed may begin tightening its policy.
“All these releases are having minor influences, but if you are looking for a big move, maybe wait until Friday,” said Bregar.
Analysts said trade on Tuesday may also be influenced by month-end stock portfolio rebalancing, which could lead to flows into the Canadian dollar, sterling and the Swiss franc and out of the greenback.
The dollar index fell 0.256%, with the euro up 0.28% to $1.1828.
The dollar hit a low of 92.395 on the day, its lowest level since Aug. 6 but is still up nearly 0.5% for the month.
Data earlier in the day showed euro zone inflation surged to a 10-year-high this month, with consumer prices in the 19 countries sharing the euro up by 3%.
Sterling strengthened to a two-week high of $1.38010, and was last trading at $1.3799, up 0.30% on the day.
The Japanese yen strengthened 0.27% versus the greenback at 109.60 per dollar.