Investing.com - The dollar backed off seven-week lows against the other major currencies on Tuesday as remarks by a senior Federal Reserve official offset lackluster U.S. inflation data.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 94.83, off lows of 94.38.
The dollar found support after New York Fed head William Dudley said the U.S. is edging closer toward the point in time where it will be appropriate to raise interest rates further.
The remarks came during an interview with Fox Business News.
The U.S. central bank raised interest rates for the first time in almost a decade in December.
Higher interest rates typically boost the dollar by making it more attractive to yield seeking investors.
At the same time the Commerce Department reported that annual inflation in the U.S. rose 0.8% in July, slightly below expectations for an increase of 0.9% and slowing from 1.0% in June.
The slowdown in annual inflation may decrease the chances of a rate hike by the U.S. central bank this year.
Consumer price inflation in the U.S. remained unchanged on a month-over-month basis in July, as gasoline prices fell for the first time in five months.
Another report showed that the number of housing starts in the U.S. rose 2.1% to 1.211 million units last month. Analysts had expected a decline of 0.8%.
The number of building permits issued dipped 0.1% to 1.152 million units from 1.153 million, compared to expectations for a 0.6% rise.
The dollar had weakened across the board on Monday in the wake of a paper from San Francisco Fed head John Williams arguing that central banks might have to lift inflation targets and favor looser fiscal policy in future..
The euro retreated from seven-week highs, with EUR/USD at 1.1280 after rising as high as 1.1322.
The dollar pulled back from seven-week lows against the yen, with USD/JPY down 1.11% at 100.11, easing from lows of 99.55.
The pound remained stronger after rebounding from one-month lows earlier, with GBP/USD up 0.74% at 1.2976.
Sterling found support after data earlier showed that U.K. consumer prices rose 0.6% year-on-year in July, up from 0.5% in June. It was the highest rate since November 2014.