The greenback edged lower against the Japanese yen on Tuesday with Federal Reserve chairman Jerome Powell due to speak on Wednesday, while the Aussie dollar jumped as sentiment improved on hopes that China would reopen from COVID shutdowns.
Powell’s comments will be evaluated for any new signs of hawkishness, with key jobs data for November due on Friday.
The dollar index has fallen to 106.82 from a 20-year high of 114.78 on Sept. 28 as investors look toward the U.S. central bank reaching a peak rate early next year with inflation pressures expected to subside.
The U.S. central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14, though the odds of a 75-basis-point increase have risen over the past several weeks and now stand at a 37% probability.
Traders are pricing for the Fed funds rate to peak at 5.01% in June, before falling back to 4.64% by December 2023. The euro fell 0.15% against the U.S. currency to $1.0324. The greenback dipped 0.15% to 138.69 Japanese yen.