Dollar Bulls Pause for Breath Amid Data Vacuum Before Fed Meets

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The dollar held its biggest drop in a month as demand for the currency waned amid an absence of fresh data to provide clues on U.S. monetary policy before the Federal Reserve meets next week.

A broad gauge of the greenback had retreated Tuesday after touching a three-month peak as futures showed a 36 percent chance the U.S. central bank will increase its benchmark rate in September, up from 31 percent a week earlier, according to data compiled by Bloomberg. The Australian dollar gained Wednesday after a government report showed inflation accelerated and ahead of a speech by Reserve Bank of Australia Governor Glenn Stevens in Sydney.

“We would not be surprised to see the dollar correct a little further,” said Prashant Newnaha, a rates strategist at TD Securities Inc. in Singapore. “The U.S. data schedule is fairly thin for the rest of this week and there are no Fed speakers on the docket to push the hawkish stance as we enter a blackout period now before the July 28-29 FOMC meeting.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, fell 0.2 percent to 1,202.56 as of 10:41 a.m. in Tokyo. The gauge snapped a four-day gain on Tuesday to fall 0.5 percent, the most since June 17, after earlier touching its highest since April 13 of 1,212.02.

Commodity Currencies

Currencies linked to commodities stabilized after slumping with a plunge in oil and gold prices earlier this week.

The Australian dollar rose 0.2 percent to 74.34 U.S. cents after hitting a six-year low of 73.28 on Monday.

The trimmed-mean gauge of core consumer prices rose 0.6 percent in the second quarter from the previous quarter, Australia’s statistics bureau said.

The kiwi dollar climbed 0.3 percent to 66.43 U.S. cents after advancing more than 1.5 percent over the past three trading days. The Reserve Bank of New Zealand meets Thursday and markets are pricing a rate cut of at least 0.25 percentage point.

“One needs to be cautious when buying dollars in anticipation of a rate hike that September is not yet a done deal,” said Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York. “There is no detail about the size or pace of rate hikes. Dollar buying will strengthen more towards September.”