Dollar Edges Higher; Key Data in Focus Ahead of Fed Meeting

The dollar edged higher Tuesday, rebounding from a one-month low although gains are small ahead of the release of key economic data and next week’s Federal Reserve meeting.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 93.882, climbing just above Monday’s one-month low.

USD/JPY traded 0.2% higher at 113.91 after Japan’s PPI for September rose 0.9% year-on-year. EUR/USD edged lower to 1.1604, GBP/USD slipped marginally to 1.3767, while the risk sensitive AUD/USD rose 0.3% to 0.7511.

The dollar was hit late last week following comments by Federal Reserve Chair Jerome Powell stating that it’s not yet time to begin raising U.S. interest rates.

The Fed has now gone into a blackout period ahead of next week’s policy-setting meeting, an eagerly-anticipated gathering where the central bank is expected to confirm the start of the withdrawal of its bond-buying stimulus.

In the absence of any Fed communication, it will be the U.S. data that the market concentrates on this week. Tuesday’s data slate includes new home sales for September and October CB consumer confidence numbers, but it’s the 3Q GDP release on Thursday and the September core PCE deflator on Friday that will attract the most attention.

“In the absence of any Fed speakers before the 3 November FOMC meeting we think that the persistence in inflation can continue to support the market re-pricing of the Fed curve – and be supportive for dollar strength against the low yielders,” said analysts at ING, in a note.

Elsewhere, USD/TRY fell 0.1% to 9.5701 after President Tayyip Erdogan rowed back from his demand that 10 Western ambassadors be expelled from Turkey over criticism of the jailing of a government critic, deescalating a diplomatic row that had shaken the currency.

The Turkish currency has rebounded in response, after falling to record lows against the dollar on Monday.

Additionally, USD/CNY fell 0.1% to 6.3819 after China’s central bank injected a net $190 billion yuan ($30 billion) into the financial system, resulting in the overnight interbank repo rate dropping as much as eight basis points to 1.53%, the lowest since September 29 and near a nine-month low.