The dollar moved in a narrow range on Tuesday, as traders absorbed a range of developments in the Middle East and prepared for speeches by central bank officials this week, including Federal Reserve Chairman Jerome Powell, to assess the policy outlook.
The dollar index, which measures the performance of the US currency against a basket of currencies, rose by 0.1% to 106.37 after falling by 0.45 yesterday, Monday.
Investors are focused on Powell's comments on Thursday, during a week filled with speeches by regional bank presidents. Fed officials will enter a blackout period from October 21 until the central bank meets on October 31 and November 1.
Patrick Harker, President of the Philadelphia Fed, said yesterday, Monday, that the central bank should not put new pressure on the economy by increasing borrowing costs.
Fed funds futures expect a 10% Fed hike in November and a 33% hike in December, according to SME's FedWatch tool.
Christopher Wong, currency strategist at OCBC, said the dollar is likely to trade in a narrow range at the moment.
Wong added that keeping interest rates high for a longer period, the relative resilience of US growth, and fears of expanding conflict in the Middle East are factors that would enhance the rise of the dollar.
But he explained that the less stringent statements of Federal Reserve officials, which indicate that the central bank is paving the way for a long period of interest stabilization, would limit the dollar’s upward trend.
Valentin Marinov, global head of G10 currency strategy and research, said that ongoing tensions in the Middle East and rising bond yields remain the main drivers in exchange markets.
