NEW YORK: The dollar edged higher against a basket of currencies on Tuesday, as a bout of volatility in global financial markets kept demand for riskier currencies in check and as investors waited for Federal Reserve Chair Jerome Powell’s testimony at a US Senate hearing.
The dollar index, which measures the greenback against six major peers, was up 0.06% at 95.997.
Global stocks edged higher, following a late-session recovery for Wall Street. Equity markets have had a weak start to the year, falling due to bets that the US central bank will tighten policy earlier than initially expected.
Powell, who has been nominated for a second four-year term as head of the Fed, will pledge to fight inflation when he testifies on Tuesday at the hearing during which he is expected to face tough questions about the surge in US inflation.
“While today’s confirmation hearing for Fed Chairman Powell will draw a lot of interest from market participants, it is not evident from the chairman’s brief opening remarks that he will break any new ground,” Shaun Osborne, chief FX strategist at Scotiabank, said in a note.
“Something more market-moving might emerge in the Q&A but it may be down to US Consumer Price Index and Producer Price Index data to move markets along later in the week, one way or the other,” Osborne said, referring to the US data that will be released on Wednesday and Thursday, respectively.
While the dollar index has been well supported in recent weeks by the idea that the Fed will raise interest rates aggressively this year, it has failed to break above the 16-month high touched late in November.
Traders have ramped up bets for rate hikes this year after the US central bank’s minutes from the Dec. 14-15 policy meeting suggested an earlier-than-expected rate hike and the possibility that it may cut its bond holdings sooner than many initially thought.
On Tuesday, the risk-sensitive Australian dollar was down 0.08%, despite data showing retail sales surpassed forecasts for a second month running in November.
After successfully containing the coronavirus for most of the pandemic, Australia has been swamped by the rapid spread of the Omicron variant, with infections near record levels.
Sterling rose on Tuesday to touch its highest level versus a the dollar in almost 10 weeks, before paring gains to trade flat on the day. Expectations that the Bank of England will raise interest rates further have helped lift the British pound in recent weeks.
Elsewhere, bitcoin was about flat on the day at $41,532.02, after having dropped below $40,000 on Monday for the first time since September.
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