Dollar stabilises near seven-month lows

The dollar steadied near its softest in seven months against the euro on Tuesday after more hawkish comments overnight from two US Federal officials helped it to stem its recent losses ahead of remarks by Fed chair Jerome Powell due later in the day.

The euro was at $1.0736, little changed on the day, trading just below its seven-month high of 1.07605 hit Monday. Sterling was down 0.1% at $1.2165, just below Monday’s three-week top.

The dollar has been sliding as markets grow increasingly doubtful that the Fed will have to take interest rates above 5% to cool inflation as effects of its aggressive rate increases last year have already been felt, reported Reuters.

Last week’s employment report showed that while the US economy added jobs at a solid clip in December, it also recorded a slowdown in wage growth.

Separate data showed softer services activity, and investors now expect rates to peak just under 5% by June, before starting to come down later in the year.

However, many Fed officials continue to say rates both have further to go and will stay at elevated levels, with Atlanta Fed Bank President Raphael Bostic and San Francisco Fed President Mary Daly taking their turns on Monday.