Dollar rebounds on hawkish Fed speak; Aussie dollar slumps
Investing.com — The U.S. dollar rose in early European trade Tuesday, rebounding from recent lows, while the Australian dollar slumped after the RBA hinted at the end of its cycle of rate hikes..
At 03:25 ET (08:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, climbed 0.2% to 105.285, above the near two-month low of 104.84 seen on Monday.
The dollar index slumped 1.3% last week, its steepest decline since mid-July, after the Federal Reserve offered up dovish signals on the likelihood for more interest rate hikes this year.
However, this tone has changed after Federal Reserve Bank of Minneapolis President Neel Kashkari hinted at the need for more interest rate increases to control inflation.
“The economy has proved to be really resilient even though we’ve raised interest rates a lot over the past couple of years. That’s good news," Kashkari said in an interview on Monday.
But he added: «We haven’t completely solved the inflation problem. We still have more work ahead of us to get it done.»
The Fed kept its overnight short-term interest rate target unchanged at between 5.25% and 5.5% last week.
Fed Chairman Jerome Powell is due to speak on Wednesday and Thursday, and traders will be looking to see if he backs up this more hawkish stance.
EUR/USD fell 0.1% to 1.0701, after German industrial production fell more than expected in September, slumping 1.4% compared with the previous month.
This adds to the mounting signs that the eurozone’s largest economy is in difficulty, and is likely to end the year in a technical recession.
The European Central Bank must remain vigilant on inflation and be prepared to raise interest rates again if needed, its policymaker Robert Holzmann said
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