Investing.com - The dollar extended gains to a two-month high against the other major currencies on Tuesday, as comments by Richmond Federal Reserve head Jeffrey Lacker and upbeat U.S. data boosted hopes for a U.S. rate hike before the end of the year.
EUR/USD retreated 0.57% to 1.1146, the lowest since September 21.
Richmond Fed governor Jeffrey Lacker suggested on Tuesday that interest rates should already be at least 1.5%, compared to the current range of 0.25%-0.50%, in a speech delivered to the West Virginia Economic Outlook Conference in Charleston, West Virginia.
Lacker also stressed the need for “pre-emptive” action to combat future inflation.
The U.S. dollar was also boosted after upbeat manufacturing activity and consumer sentiment data sparked optimism over the strength of the economy and supported the case for a rate hike by the Federal Reserve before the year end.
Market participants were focusing on Friday’s U.S. nonfarm payrolls report for further indications on the strength of the job market, as the Federal Reserve has indicated that future interest rate decisions will be data-dependent.
GBP/USD dropped 0.65% to trade at a 31-year low of 1.2752.
Research firm Markit said on Tuesday that its U.K. construction purchasing managers' index rose to 52.3 in September from August’s reading of 49.2. Economists had expected the index to drop to 49.0 in September.
But the pound remained under broad selling pressure amid concerns over a ‘hard brexit’ after British Prime Minister Theresa May set a March deadline to begin the UK's formal departure process from the European Union.
USD/JPY rallied 1.09% to a two-week high of 102.57, while USD/CHF advanced 0.89% to 0.9822.
The Australian and New Zealand dollars were weaker, with AUD/USD down 0.47% at 0.7642 and with NZD/USD sliding 0.40% to 0.7249.
The Reserve Bank of Australia left its benchmark interest rate unchanged at 1.50% at its first policy meeting chaired by new governor Philip Lowe on Tuesday.
"The board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the RBA said in a statement.
Earlier in the day, the Australian Bureau of Statistics said that building approvals declined by 1.8% in August, compared to expectations for a 7.0% drop. Building approvals climbed 12.0% in July, whose figure was revised from a previously estimated 11.3% gain.
Elsewhere, USD/CAD gained 0.40% to trade at 1.3173, the highest since September 30.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.71% at a two-month high of 96.32.