Dollar dives to two-month low, pound scale 15-month peaks on wage growth data
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) — The dollar declined to a two-month low against a major currency index on Tuesday after Federal Reserve officials signaled that the U.S. central bank is near the end of its tightening cycle, while sterling hit a 15-month high after pay growth exceeded expectations.
Against the yen, the dollar fell to a four-week trough of 140.17. It last traded down 0.7% at 140.385 yen. The U.S. currency also plunged to its lowest in 2-1/2 years versus the Swiss franc, and was last at 0.8797 francs, down 0.6%.
Several Fed officials said on Monday the central bank would likely need to raise interest rates further to bring down inflation but the end to its current monetary policy tightening cycle was getting close.
The comments knocked the greenback to a two-month low of 101.66 against a basket of currencies, as traders pared back their expectations about how much further U.S. rates may have to rise. The dollar index was last down 0.3% at 101.65.
«Friday's NFP (nonfarm payrolls) report revealed, for the first time since COVID, potential cracks in the U.S. labor market, hinting that the Fed may have to settle on just a single rate hike in the second half of the year,» said Matt Weller, global head of research at Forex.com and City Index.
The June non-farm payrolls report showed the fewest job gains in 2-1/2 years.
«Meanwhile, (Tuesday) morning's strong UK wage growth data and the ongoing short squeeze in the Japanese yen are driving two of the greenback's biggest rivals higher as traders anxiously await (Wednesday's) U.S. CPI report,» Weller added.
Expectations are for core U.S. consumer prices to have risen 5% on an annual basis in June. The CPI data should provide more clarity on the Fed's
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