The dollar index (DXY00) fell from a 1-month high on Tuesday, finishing down -0.14%. The dollar gave up an early advance on Tuesday and moved lower on an unexpected decline in July consumer confidence. Also, Tuesday’s -4% plunge in WTI crude oil to a 1-week low has lowered inflation expectations that could prompt the Fed to pursue easier monetary policy, a negative factor for the dollar. In addition, lower T-note yields on Tuesday weakened the dollar’s interest rate differentials.
Losses in the dollar were limited amid some mild short covering ahead of the 2-day FOMC meeting that began on Tuesday. The dollar is also supported by some safe-haven demand amid heightened tensions in the Middle East.