Feb 7 (Reuters) - The dollar hovered near one-month
highs on Tuesday ahead of a speech by Federal Reserve Chair
Jerome Powell that will be scoured by investors for any signals
on how high U.S. interest rates may go this year.
The dollar index , which measures the performance of
the greenback against a basket of six other currencies, erased
session losses of up to 0.2% and edged up 0.1% to 103.68,
holding around its highest since early January.
Investors will be looking for Powell's take on the labour
market in a speech at the Economic Club of Washington due later
in the day, after a sharp rise in jobs growth last week
punctured hopes for a tempered Fed.
"The stronger U.S. data has clearly challenged market
expectations for further U.S. dollar weakness in the near-term
and for the Fed to soon bring an end to their rate hike cycle,"
said Lee Hardman, MUFG senior currency analyst.
U.S. interest-rate futures show that markets are
expecting the Fed funds rate to peak just above 5.1% by June,
compared with expectations of a peak below 5% prior to Friday's
jobs report. Friday's jobs report wrongfooted traders who were banking on
an imminent pause in the Fed's rate-hike cycle, and gave the
U.S. currency a leg up.
The euro fell 0.2% to $1.07025, having hit its
lowest since Jan. 9 earlier in the day.
"(Powell) has the chance to walk back some of the commentary
that he made on Wednesday last week that prompted this dovish
read," said Simon Harvey, head of FX analysis at Monex, but
added that he does not expect any new messaging from Powell.
"The Fed still has some progress to make, there are signs of
positivity in terms of the disinflationary pressures that are in
the pipeline, but there is still a labour market problem."
Sterling was last 0.3% down against the dollar at
$1.1982, after tumbling to a one-month low of $1.1974 in the
previous session.
Investors are looking for further commentary from central
bankers this week following what was viewed as a dovish outcome
of Bank of England's meeting last week.
The Australian dollar was up 0.6% at $0.6924 after
having surged as much as 1% after the country's central bank
raised its cash rate by 25 basis points and said more increases
would be needed, a more hawkish policy tilt than many had
expected.
The Japanese yen attempted to make back some of
the losses over the last two sessions, with the dollar-yen pair
down 0.4% at 132.14.
It moved away from Monday's one-month low of 132.90 per
dollar hit after a report that Japan's government has sounded
out Bank of Japan Deputy Governor Masayoshi Amamiya - considered
by markets as more dovish than other contenders - to succeed
incumbent Haruhiko Kuroda as central bank governor.
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(Reporting by Rae Wee and Susan Mathew; Editing by Muralikumar
Anantharaman, Kenneth Maxwell and Arun Koyyur)
