The US dollar struggled for direction in Asian trading on Tuesday, with currency markets treading cautiously as investors parsed recent comments from Federal Reserve officials for signals on the path of US interest rates.
After snapping a three-day winning streak on Monday, the greenback fluctuated between modest gains and losses, with the US dollar index holding flat at 97.326. Analysts said traders were hesitant to take strong positions ahead of key US economic data due later this week, which could shape expectations for future Fed policy moves.
Against the Japanese yen, the dollar was steady at 147.775, reflecting subdued demand as markets remained wary of potential intervention by Tokyo to support its currency. The euro was little changed at $1.1798, while sterling also traded flat at $1.35075 after oscillating between gains and losses in the session.
Commodity-linked currencies weakened, with the Australian dollar slipping 0.2% to $0.6584, retreating further from Monday’s two-week low. The New Zealand dollar, or kiwi, lost 0.3% to $0.5848, weighed down by weaker risk appetite across markets.
Emerging market currencies saw sharper moves. The Indian rupee slid to a record low of 88.62 against the dollar, pressured by persistent capital outflows and rising energy import costs. The Argentine peso dropped 4.5% against the greenback, extending losses amid deepening economic strains and policy uncertainty in Buenos Aires.
“The dollar has lost some momentum as traders await fresh catalysts, but elevated US bond yields are keeping downside limited,” said one currency strategist at a Tokyo-based investment bank.
Indeed, US Treasury yields continued their upward march. The yield on the benchmark 10-year note rose further to 4.1467%, underlining expectations that the Federal Reserve may keep rates higher for longer if inflation proves sticky. Rising yields tend to support the dollar by boosting returns on US assets, though they can also dampen sentiment in risk-sensitive currencies and emerging markets.
Currency analysts said much would depend on upcoming US inflation and retail sales figures, as well as any further signals from Fed officials on the timing of potential rate cuts. For now, the greenback’s performance suggests traders are bracing for choppy sessions ahead.
“Markets are consolidating after recent swings, but volatility could return quickly if incoming data shifts the outlook for Fed policy,” said another analyst.
