The US currency did not benefit from a rise in overnight Treasury yields, and investors await key retail sales reports and comments from Federal Reserve officials to better gauge the timing and pace of interest rate cuts.
The Australian dollar remained in the middle of its trading range last month, and the Reserve Bank of Australia subsequently kept interest rates steady.
The U.S. dollar index, which measures the currency against the euro, sterling and four other major peer currencies, eased slightly to 105.26 in early Asian trading hours, slipping from Friday’s one-and-a-half-month high of 105.80.
The index’s rally was driven mainly by a massive sell-off in the euro after French President Emmanuel Macron called a snap election last week in response to his ruling centrist party’s rout in European Parliament elections by Marine Le Pen’s eurosceptic National Rally.
“It’s becoming increasingly clear that instability in parliament is what drives markets, and sober minded people would argue that any government that includes Le Pen’s RN party is unlikely to do much to impact the fiscal situation,” said Chris Weston, head of research at Pepperstone.
“Le Pen has to win the presidential election in 2027, and that is only possible if the party wins the respect of the bond market.”
The euro rose 0.04% to $1.0738, extending its 0.26% rise in the previous session. Sterling rose 0.06% to $1.2712.
The dollar was little changed at 157.66 yen.
The dollar has been pulled in both directions, with mild inflation data in the U.S. a contrast to the overall accommodative stance of Fed officials at last week’s policy meeting, when they lowered their previous median forecast of three-quarter-point interest rate cuts this year to one.
Philadelphia Fed President Patrick Harker revealed on Monday that he favors a single rate cut but is leaving the option open to changing his outlook depending on incoming data.
A long list of Fed officials will take the stage at various points later in the day, including Susan Collins of the Boston Fed and Thomas Barkin of the Richmond Fed.
Earlier, the Reserve Bank of Australia is expected to keep interest rates steady for a fifth consecutive meeting on Tuesday, with most economists in a Reuters poll forecasting the first cut in the fourth quarter.
“Financial markets are assuming virtually no prospect of a change to the Reserve Bank of Australia cash rate today (and) we agree,” Commonwealth Bank of Australia economist Christina Clifton wrote in a note.
“Unless there are any significant changes in the post-meeting statement, we expect the RBA’s announcement to have no significant impact on the AUD.”
The Australian dollar rose 0.08% to $0.66175. The New Zealand kiwi dollar also rose 0.08% to trade at $0.6136.
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