The US Dollar Index (DXY), an index of the value of the US Dollar (USD) against a basket of six world currencies, rose after dovish comments from Federal Reserve (Fed) officials raised expectations for a rate cut next month, weighing on the DXY.
At 10 a.m., the US Dollar Index was at 99.721 points, down 0.07% since it opened in early Asian trading on Wednesday.
Fed Governor Christopher Waller said on Monday that available data showed the labor market was still weak enough to warrant another quarter-point cut at the December meeting.
Meanwhile, San Francisco Fed President Mary Daly said she supported a rate cut next month because she sees a sharp deterioration in the jobs market as both more likely and more difficult to manage than rising inflation.
The Fed still has the potential to cut interest rates in the near term without affecting its inflation target. Following the dovish statement, the US dollar weakened against other major currencies as traders increased their bets on a December rate cut.
According to the CME FedWatch tool, Fed funds futures are now placing a near 80% probability on a 25 basis point rate cut at the December Fed meeting, up significantly from around 30% a week ago.
Investors will be focusing on new US economic data due out on Tuesday, including the ADP Employment Change, Retail Sales and Producer Prices reports.
The Producer Price Index (PPI) is estimated to have risen 0.3% in September, while Retail Sales is expected to have risen 0.4% in the same period. The data is expected to provide a clearer picture of the direction of US interest rates. If the reading is stronger than expected, the US Dollar Index (DXY) could strengthen in the near term.
