The U.S. dollar fell against its most major counterparts in the European session on Tuesday amid a drop in treasury yields, as dovish comments from Federal Reserve officials lowered expectations for further interest rate hikes.
Top Fed officials cautioned on raising rates further and highlighted the financial tightening from the recent rise in treasury yields.
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.
Money markets currently assign a 70.5% probability that the Fed will hold rates steady in December.
The greenback touched 0.9034 against the franc and 1.2275 against the pound, setting nearly 3-week lows. The greenback is poised to find support around 0.87 against the franc and 1.25 against the pound.
The greenback was down against the euro, at nearly a 2-week low of 1.0611. If it drops further, it may find support around the 1.07 area.
The greenback fell back to 1.3577 against the loonie, heading to pierce its previous 8-day low of 1.3569. Next key support for the currency is likely seen around the 1.32 level.
In contrast, the greenback climbed to 0.6391 against the aussie and 0.5999 against the kiwi, from an early 8-day low of 0.6433 and nearly a 2-week low of 0.6041, respectively. The currency is seen facing resistance around 0.62 against the aussie and 0.57 against the kiwi.
The greenback recovered to 149.09 against the yen, reversing from an early 1-week low of 148.16. On the upside, 155.00 is seen as its next resistance level.
U.S. wholesale inventories for August will be published in the New York session.