Investing.com - The dollar pulled back from a five-month high against major rivals on Tuesday, as traders opted to take profits after the recent rally, while Forex traders focused on testimony to the UK Treasury Select Committee.
At 5:39AM ET (9:39GMT) Tuesday, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dropped 0.19% to 93.28, pulling back from its five-month high of 93.97 hit a day earlier.
Tuesday’s economic calendar will be light with the focus on the Richmond manufacturing index out at 10:00AM ET (14:00GMT) as investors wait for the release of the minutes from the last Federal Reserve policy decision on Wednesday.
Investors will also have a break from policymakers with no appearances scheduled on Tuesday, while gearing up for an appearance from Fed chairman Jerome Powell who will participate in a panel discussion of "Financial Stability and Central Bank Transparency" at the Sveriges Riskbank Conference in Stockholm, Sweden on Friday.
In currency pairs, the pound bounced back against the dollar on Tuesday after the pair hit its lowest level since the end of December a day earlier. Traders are currently keeping an eye on comments from members of the Bank of England’s Monetary Policy Committee (MPC) in testimony to the UK Treasury Select Committee.
Initially, the pound got a boost from remarks from MPC member Gertjan Vlieghe who said that he could see up to six rate hikes over the next three years, a more hawkish view than that at the heart of the BoE. Sterling hit an intraday high of $1.3491 on the remarks but has since pared those gains.
Vlieghe also argued for the BoE to provide a detailed dot plot on the future path of interest rates, following the Federal Reserve’s own projections. However, BoE deputy governor David Ramsden and MPC member Michael Saunders indicated that they didn’t agree.
Meanwhile, BoE governor Mark Carney largely repeated comments from when the post policy decision press conference earlier this month when the central bank decided to leave rates on hold. In his testimony to the Treasury Select Committee on Tuesday, Carney explained that there were “temporary, idiosyncratic factors that hit growth in the first quarter” and reiterated that the BoE expects interest rates to rise at a limited and gradual rate.
At 5:41AM ET (9:41GMT), GBP/USD was last up 0.25% to 1.3458.
Meanwhile, the euro managed to break back above the $1.18 level on Tuesday after concerns over political uncertainty in Italy sent the single currency to its lowest level since last November. At 5:42AM ET (9:42GMT), EUR/USD rebounded 0.19% to 1.1813.
Over in Asia, USD/JPY was unable to hold the 111 psychological level. The pair slipped 10% to 110.94.
Lastly, the generalized dollar weakness also spread to both the loonie and Swiss Franc. USD/CAD lost 0.20% to 1.2761, while USD/CHF fell 0.15% to 0.9958.