The dollar climbed 0.47% against a basket of currencies to a one-month high of 103.13 on Tuesday, as investors pared back expectations for a U.S. Federal Reserve rate cut in March. The pound and yen retreated as inflation pressures abated.
Sterling slid 0.53% to $1.266 after data showed British wage growth slowing sharply in November, bolstering the case for the Bank of England to reduce rates heavily this year.
The yen dipped 0.49% to 146.52 per dollar as Japan’s wholesale price index was unchanged annually in December, with the pace of increase slowing for the 12th straight month.
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Comments from European Central Bank officials casting doubt on near-term rate reductions overshadowed the global outlook for borrowing costs. The euro sank 0.54% to $1.0892, headed for its biggest one-day drop in two weeks.
The hawkish remarks “have fuelled concerns that market pricing for the Fed rate path may also be aggressive,” said Charu Chanana, Saxo Bank’s head of currency strategy in Singapore. Meanwhile, a dismal growth outlook for Germany’s economy, which contracted 0.3% last year, likely also weighed on the euro.
