SINGAPORE/TOKYO: The dollar edged higher versus a basket of currencies on Tuesday after a top U.S. Federal Reserve official said it should wait no more than a few months before considering an interest rate hike.
Market participants also attributed the dollar's bounce to technical factors and said the greenback may face further long liquidation after the Fed signalled last week that it is in no rush to tighten monetary policy.
By early afternoon, the dollar was up 0.1 percent against a basket of major currencies at 97.102, having risen to as high as 97.296 earlier in the day.
Still, the dollar index remains well below its near 12-year high of 100.39 set earlier in March.
Traders said the greenback gained a boost after San Francisco Fed chief John Williams reiterated that the Fed should seriously discuss raising rates by mid-year.
The dollar also gained a boost after finding some support on technical charts, said Shinji Kureda, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo.
"The position adjustment type of dollar weakness seen after the FOMC is taking a breather, and for now there is some short-covering in the dollar," Kureda said.
Still, it may be difficult to keep buying the dollar based solely on rate rise expectations at this juncture, he said, adding that market sentiment toward the greenback had changed significantly after the Fed policy meeting last week.
"My view is that while the possibility of a June rate rise hasn't been ruled out, they lack the conviction to do so if economic indicators remain near recent levels," Kureda said.
The greenback had gotten little help on Monday from comments by Fed officials, some of whom appeared to fall in line with the March 18 policy statement that suggested a less aggressive timetable for hiking rates.
Fed Vice Chair Stanley Fischer said the central bank was "widely expected" to begin raising rates this year though the policy path remains uncertain, with the latter rather than the former drawing more attention from the wary market.
The euro eased 0.1 percent versus the dollar to around $1.0931, having slipped off an intraday high of $1.0968, which was just short of Monday's peak at $1.0972.
"After the very significant bout of...dollar long liquidation that we've seen in the last few days, there's a bit of consolidation now," said Mitul Kotecha, head of FX strategy, Asia-Pacific for Barclays in Singapore.
Still, the market is still very long the dollar, Kotecha said, adding that there may be some hesitancy to buy the greenback at this point.
Against the yen, the dollar eased 0.1 percent to about 119.65 yen, near the bottom of its 122.04 yen to 119.29 yen range seen over the past couple of weeks
The Australian dollar dipped briefly after a survey showed that activity in China's factory sector dipped to a 11-month low in March.
The Australian dollar touched an intraday low of $0.7835 right after the release of the China flash HSBC PMI, but later came off that trough. It last traded at $0.7868, down 0.2 percent on the day, but back around levels seen ahead of the PMI survey.
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