The U.S. dollar stabilized in Tuesday's Asia session as traders awaited key inflation data that could further strengthen the currency. A recent drop in oil prices and a rebound in stock markets had initially weakened the dollar, but expectations of higher interest rates kept it supported. The Australian dollar rose nearly 1% to $0.6921, while the New Zealand dollar climbed to $0.5624, both holding steady in early trading. The euro also gained 0.7% overnight, reversing some losses from Friday after strong U.S. jobs data boosted the dollar.
Economists expect October's headline inflation to reach 3.9% and core inflation to hit 2.8%, year-on-year. Any figures exceeding these estimates could fuel further rate hike expectations and lift the dollar. Imre Speizer, a strategist at Westpac in Auckland, noted that while December rate hike bets are already priced in, future meetings could see higher expectations. Markets are currently pricing in two U.S. rate hikes by mid-2027, though recent turbulence in AI stocks has slightly dimmed this outlook.
The British pound remained steady at $1.3441, supported by the Bank of England's first interest rate hike in three years. Meanwhile, Japan's yen hovered at 157.97 per dollar, benefiting from heavy official intervention to defend the currency. Data showed Japan sold $97 billion in reserves in late July and August to prop up the yen, which has been the best-performing G10 currency against the dollar over the past six months.