The US dollar remained on the defensive on Tuesday, after carving out a fresh low on the break of a technical barrier overnight as momentum sellers joined in the fray. The dollar index was swept to a near eight-month low of 93.748 on Monday as the October trough of 93.806 gave way. It has since drifted back to 94.015 in early Asia. Still, the index has shed nearly 3 percent after recent dovish comments by Federal Reserve Chair Janet Yellen doused expectations for hikes in US interest rates anytime soon.
Fed funds futures imply barely one quarter point increase for the whole of 2016, with only about a 20 percent chance of a hike in June priced in. "In the big scheme of things, since the previous Group of 20 meeting in February, there's a perception that there's a political agreement between the United States and China that a strong dollar is not desirable," said a trader at a US bank in Tokyo.
Weakness in the dollar kept the yen and euro not far from multi-month peaks. The greenback recovered 0.3 percent in Asian trade on Tuesday to 108.24 yen, after having slumped to a 17-month low of 107.63 yen on Monday. "Today we saw people taking profits on their bets for now. But the dollar remains weak and looks likely to fall further in the near future," said a trader at a major Japanese bank. The euro, which touched a six-month high of $1.1454 last Thursday, was at $1.1406. Japanese authorities on Monday warned the yen moves were "one-sided and speculative" and that the government stood ready to intervene to weaken the currency.
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