Dollar weakens as focus turns to Fed minutes
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FILE PHOTO: U.S. Dollar and Japan Yen notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration/File Photo
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - The dollar slipped on Tuesday after six straight days of gains, as U.S. Treasury yields dipped and investors looked for fresh incentives to buy the currency following a nearly 7 percent rally since mid-February.
The dollar's recent uptrend has been supported by generally upbeat U.S. economic data that has kept the Federal Reserve on track to raise interest rates at least two more times this year.
In contrast, other major central banks such as the Bank of Japan are not in a tightening mode.
"The U.S. dollar may require a fresh dose of catalysts to sustain its nascent resurgence," said Mazen Issa, senior FX strategist at TD Securities in New York.
"Against a backdrop of higher rates, including the overly-emphasized 3 percent mark in U.S. 10-year yields and a very fully-priced Fed, the dollar may have exhausted the divergence narrative," he added.
The divergence referred to the difference in monetary policies between the Fed and other central banks, which has been a major prop for the dollar.
In late trading, the dollar index was down 0.1 percent at 93.605 <.DXY>, after hitting a five-month high on Monday. The index, which tracks the dollar against a basket of currencies, was on pace for its largest daily loss in two weeks.
The dollar was supported on Monday on signs the United States and China were making progress to resolve their trade conflict. On Tuesday, China said it would cut import tariffs for automobiles, opening greater access to the world’s largest auto market, in a further sign of easing trade tensions.
U.S. Treasury yields pulled back from last week's seven-year highs though, but still traded above 3 percent on Tuesday.
Investors are now looking to the release on Wednesday of the Fed's minutes from its most recent meeting and analysts said there could be inflationary overtones.
James Chen, head of research at Forex.com in Bedminster, New Jersey, said a key level to watch on the dollar index amid the Fed's minutes is the 94.00 resistance level.
"Any hawkish interpretation of the minutes could prompt a breakout above that level, which could then open the way towards the 95.00 handle and above," Chen said.
"To the downside, any dovish interpretation could prompt a pullback towards the 92.50 support area once again," he added.
In other currency pairs, the euro dipped 0.1 percent against the dollar to $1.1778
The dollar, meanwhile, slipped 0.1 percent against the yen to 111 yen
========================================================
Currency bid prices at 1451 EDT (1851 GMT):
Description RIC Last U.S. Pct YTD High Bid Low Bid
ClosePre Change PctChan
vious ge
Session
Euro/Dollar
Dollar/Yen
Euro/Yen
Dollar/Swiss
Sterling/Dollar
Dollar/Canadian
Australian/Doll
ar
Euro/Swiss
Euro/Sterling
NZ
Dollar/Dollar
Dollar/Norway
Euro/Norway
Dollar/Sweden
Euro/Sweden
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Paul Simao and Chizu Nomiyama)
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