The dollar index was off around 0.3% from Monday’s 8-month high of 100.0, coming within a whisker of surpassing the 12-year high of 100.39 set back in March. Growing expectations that the Fed will raise rates when it meets in December are driving the dollar higher. Fed Chair Janet Yellen on Monday tried to appease concerns of higher interest rates saying that “an overly aggressive increase in rates” would damage economic growth and force a return to low interest rates. Yellen was responding to a letter written on behalf of savers who are calling for higher interest rates.
The dollar held to within its past two-day trading range against the yen on Tuesday and was slightly down at 122.71 yen in late Asian trading after touching an earlier high of 122.95 yen. The yen was supported by an increase in Japan’s manufacturing PMI, which rose to 52.8 in November from 52.4 the prior month.
The euro also stuck to a tight range and bounced off lows of 1.0592 dollars on Monday to climb to a high of 1.0643 dollars in today’s Asian session. Better-than-expected Eurozone PMI data from yesterday did little to alter the view that the European Central Bank will announce additional monetary stimulus measures in December.
The pound was stuck below 1.52 dollars but it had recovered to 1.5140 dollars on Tuesday from a low of 1.5108 dollar yesterday.
Commodity prices attempted a rebound as the dollar moved away from 8-month highs. Gold was up at $1072.17, while copper had climbed to $2.0298 per pound in late Asian session. Crude oil was given a boost from reports that Saudi Arabia will cooperate with other oil producers to help stabilise prices, raising expectations that OPEC may announce production cuts when it meets on December 4.
The Australian dollar took strength from higher commodities to climb to 0.7212 against the greenback.
Coming up later today, the German IFO business survey will come into focus in the European session, while later in the US session, the second estimate of third quarter US GDP data could attract a lot of attention if it is revised higher as expected.