NEW YORK/LONDON: The dollar inched higher on Tuesday, rising for a third consecutive day as positive economic data and shifting expectations for Federal Reserve policy outweighed concerns about another US government shutdown.
The dollar index, which measures the greenback against a basket of currencies, was last slightly higher at 97.62, extending a two-day 1.5percent advance. The euro was little changed at USD1.1791.
The greenback has been on a stronger footing in recent days following Kevin Warsh’s nomination as the next Fed chief, as markets broadly expect him to be less likely to press for rapid rate cuts than other candidates.
Warsh’s nomination also signalled that US President Donald Trump was not looking to take away the Fed’s power over policy setting, said Lee Hardman, senior currency analyst at MUFG. But, he noted, Warsh was also likely to “at least initially support lower rates”.
“We think when the dust settles, the dollar will re-weaken and we expect the euro-dollar to rise back above the 1.20 level later this year as the Fed cuts rates and the ECB keeps rates on a hold.” US manufacturing data, meanwhile, showed a return to growth, with the Institute for Supply Management saying on Monday that its manufacturing PMI rebounded to 52.6 last month, the highest reading since August 2022.
The closely watched US jobs report for January, however, will not be released this week because of a partial shutdown of the federal government. Elsewhere, geopolitical tensions cooled as the US reached a trade deal with India and said nuclear talks would resume with Iran.
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