Dollar remains steady as investors look up to policy clues from US Fed Reserve
The dollar was largely steady against its major peers on Tuesday as investors looked to policy clues from the U.S. Federal Reserve, which is widely expected to hike rates this week, as financial markets fret over a heated Sino-U.S. trade dispute.
Markets around the world have been sideswiped in the past few months as the intensifying trade row between China and the United States stoked uncertainty about the outlook for global growth and broader monetary policy for some developed and emerging market economies.
On Monday, the United States and China imposed a new round of tariffs on each other's goods with no sign either side is willing to back down.
The Fed begins its two-day policy meeting later on Tuesday at which it is expected to raise interest rates for the eight times since late 2015. Markets are also betting on another rate hike before year-end, though the outlook for 2019 is less clear.
"Despite U.S.-China trade tensions, the U.S. economy is okay. That is why the Fed can continue tightening," Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said.
The dollar index, which measures the greenback against a basket of six currencies, was about 0.1 percent higher at 94.274.
Against the Japanese yen, the dollar rose about 0.1 percent to 112.91 yen. It briefly traded at 112.96 yen, its highest level since touching 113.16 yen on July 19.
The Australian dollar, a proxy of China-related trades and a gauge of broad risk appetite, was flat at $0.7252 after dropping nearly half a percent the previous day.
For example, net long positions for the dollar have grown to nearly $25 billion according to CFTC data.
The common currency rose after ECB's Draghi on Monday described an acceleration in underlying inflation in the eurozone as "relatively vigorous" and expressed confidence that a pick-up in wage growth would continue.
But Draghi reaffirmed the ECB's pledge to keep rates at their current, rock-bottom level "through the summer" of next year, effectively rebuffing calls from some policymakers to tighten policy more quickly.
"The sentiment of euro area corporates is not as buoyant as before, so I think it's not the timing for the ECB to be more hawkish," Yamamoto said.