Investing.com - The dollar held weaker on Tuesday with comments on trade from the Trump administration weighing on sentiment and investors looking ahead to the latest Fed views on rates on Wednesday.
The Fed indicated last month that at least three rate increases were in the offing for 2017. However, traders remained unconvinced. Instead, markets are pricing in just two rate hikes during the course of this year, according to Investing.com’s Fed Rate Monitor Tool.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.84% to 99.58. USD/JPY dropped 0.80% to 112.86 after the Bank of Japan earlier in the day raised its outlook for growth and held policy steady. GBP/USD traded up 0.69% to 1.2572
EUR/USD rose 0.92% to 1.0792.
Earlier, the dollar tumbled against a basket of the other major currencies on Tuesday as the euro surged after President Donald Trump’s top trade adviser accused Germany of currency exploitation. Peter Navarro, the head of Trump’s new National Trade Council, said Germany is using a “grossly undervalued” euro to exploit the U.S. and its trading partners.
German Chancellor Angela Merkel rejected the remarks, saying that Germany cannot influence the value of the euro, and that the country has always called for the European Central Bank to have independent policy.
The dollar came under additional selling pressure after Trump, in a meeting with the chief executives of several top drugmakers, said drug companies had outsourced production because of currency devaluation by other countries.
The remarks indicated that the new administration is focusing on currencies as part of its approach in relation to trade.
Investors also remained on edge following Trump’s controversial travel ban, which sparked widespread protests in the U.S. and led to the firing of acting Attorney General Sally Yates on Monday, after she told justice department lawyers not to defend it.
Sterling was also higher against the dollar ahead of the Bank of England’s upcoming meeting on Thursday. The BoE is expected to revise up its outlook for inflation and growth, but uncertainty over Brexit is expected to cloud the outlook.