The euro scored a nine-month peak of $1.0874 in early trade before going back to $1.0861, down 0.16% by 0920 GMT. At the same time, the Australian dollar reached the key $0.7000 level for the first time after August before dropping to $0.6959.
The dollar index follows the U.S. unit versus a basket of currencies. It dropped to a seven-month track of 101.77, spreading its selloff from last week after data revealed that U.S. consumer prices dropped for the first time in over 2-1/2 years in December. Dollar owes its gratitude to the early sterling strength and the Japanese yen.
According to what MUFG analysts said in a note, very G10 currency earned versus the U.S. dollar last week, supported by the U.S. inflation data for December, which established a resumed relaxing in inflation pressures that supports the prospect of the Fed halting its tightening cycle, conceivably after the March FOMC meeting.
The Fed’s aggressive rate boosts were the main reason for the dollar index’s 8% increase last year.
Markets presently stay at a 91% chance of a 25-basis-point rise when the Fed declares its policy decision in February, with a 9% probability of a 50-bp hike.
The dollar was steady in European trading, retrieving ground versus the pound, falling 0.4% at $1.2185.
Markets Challenge BOJ
The Japanese yen has been the focus of particular attention this week in the currency markets because it is anticipated that the Bank of Japan will either completely abandon its yield control policy at its conference or make further changes.
Early in trading, the dollar hit a low against the yen of more than seven months before recovering and closing at 128.35 yen, up 0.4%.
BOJ Governor Haruhiko Kuroda will leave his position in April.
