The U.S. dollar drifted lower against its major counterparts on Tuesday as bond yields fell after dovish comments from some Federal Reserve officials lowered expectations for further interest rate hikes for now.
The yield on benchmark 10-year Treasury Note dropped to around 4.65% amid fading bets about rate hikes and as bonds attracted safe-haven buying.
Fed Bank of Atlanta President Bostic reiterated that he doesn’t think policymakers need to raise interest rates any further.
Fed Vice Chair Philip Jefferson said on Monday that the central bank is “in a position to proceed carefully in assessing the extent of any additional policy firming that may be necessary.”
“Higher term premiums result in higher term interest rates for the same setting of the fed funds rate, all else equal. Thus, if term premiums rise, they could do some of the work of cooling the economy for us, leaving less need for additional monetary policy tightening,” Dallas Fed President Lorie Logan said.
The International Monetary Fund (IMF) downgraded the global growth forecast for next year, saying the projections are weakest in decades, while the likelihood of a soft-landing has increased with growing divergences amid modestly easing inflationary pressures.
Growth forecasts for the U.S. economy for this year and next were raised to 2.1 percent and 1.5 percent, respectively.
Investors now look ahead to the release of U.S. CPI data and minutes of the Fed’s September monetary policy meeting this week for further direction.
The dollar index, which dropped to 105.66 around early afternoon, has edged up to 105.76, but still remains well below the flat line, losing about 0.3%.
Against the Euro, the dollar has weakened to 1.0607, and against Pound Sterling, is down at 1.2289.
Against the Japanese currency, the dollar is trading at 148.73 yen, gaining about 0.15%. The dollar is weak against the Aussie at 0.6430. Against Swiss franc, the greenback is down more than 0.2%, fetching CHF 0.9046 a unit.
The dollar is down slightly against the Loonie at C$ 1.3583.