The dollar showed signs of indecision on Tuesday as investors maintained their outlook on the expected timing of Federal Reserve monetary easing this year.
Cryptocurrencies experienced a rally, led by a surge in ether, driven by positive risk appetite and growing anticipation of the approval of spot ether exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC).
The euro saw a slight increase of 0.06% to $1.0860.
Investor attention is now turning to Thursday’s data from the European Central Bank’s negotiated wage tracker and the euro zone Purchasing Managers’ Index (PMI), which are expected to offer further insights into the monetary cycle in the euro area.
With minimal impactful U.S. economic data scheduled for release this week, investors are closely monitoring a series of speeches by Fed officials.
Despite a recent easing in consumer price pressures in April, several Fed officials reiterated the need for continued policy caution. Money markets are currently pricing in 42 basis points of Fed rate cuts in 2024, suggesting a 25 basis point reduction and a 68% chance of a second cut by December.
Against a basket of currencies, the dollar edged down by 0.08% to 104.52.
Looking ahead, market focus will shift to the release of the Personal Consumption Expenditures (PCE) price index report on May 31, which serves as the Fed’s preferred measure of inflation.
In the cryptocurrency market, ether surged 4.5% to $3,663.40, following a significant gain in the previous session. Bitcoin also climbed above $70,000, trading 2% higher at $71,128.
The dollar slipped by 0.13% against the yen to 156.41, hovering near its lowest level in over 30 years. Japan’s 10-year bond yield reached an 11-year high at 0.983%.
While concerns about potential intervention from Japanese authorities restrained traders from pushing the yen lower, the substantial interest rate differentials between the U.S. and Japan continued to support the yen’s appeal as a funding currency.
In other currency movements, the New Zealand dollar fell by 0.02% to $0.6103, and the Australian dollar slipped by 0.03% to $0.6656.
Minutes from the Reserve Bank of Australia’s May meeting, released on Tuesday, revealed that the central bank opted to maintain interest rates unchanged to avoid excessive policy adjustments, although it acknowledged the possibility of a rate hike if inflation forecasts proved overly optimistic.
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