The dollar rose against a basket of currencies on Tuesday, rebounding from a two-month low hit the previous day, helped by strong US data and as Federal Reserve chair nominee Jerome Powell signalled that the central bank is likely to raise interest rates again next month. The dollar index, which measures the greenback against six rival currencies, was up 0.36 percent at 93.24.
"This is partly an unwind of some of the move we saw last week, which took place in the wake of the slightly more cautious minutes from the Fed and in an especially illiquid holiday market," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. The dollar index slipped nearly 1 percent last week after the minutes of the Federal Reserve's latest meeting showed some policymakers were concerned about persistently low inflation.
"Data so far this week has been very positive," said Esiner. Data on Tuesday showed U.S consumer confidence surged to a near 17-year high in November, driven by a robust labour market. The dollar was also supported by comments from Fed chair nominee Jerome Powell, Esiner said. "The case for raising interest rates at our next meeting is coming together," Powell told the Senate Banking Committee on Tuesday.
The Fed should "respond decisively" to any new economic crisis, Powell said, positioning himself as an heir to the central bank policies of current Fed Chair Janet Yellen and her predecessor Ben Bernanke. Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California, said Powell's remark painted a picture that was largely similar to the outgoing Chair Janet Yellen's monetary policy strategy.
"What he is trying to convey is that there is going to be consistency in the transition," Trang said. The dollar added to gains slightly after US President Donald Trump's push for a big package of tax cuts moved past a potential obstacle on Tuesday as a Senate panel approved the measure despite lingering concerns from some Republican members.
Against the yen the dollar was 0.3 percent higher, shrugging off momentary weakness, after North Korea launched a missile that landed close to Japan on Wednesday. The British pound rallied more than a percent from its lows on Tuesday after The Daily Telegraph newspaper reported that Britain and the European Union had agreed on the Brexit divorce bill, citing unidentified sources.