Dollar wobbles as markets await more Fed clues; RBA meeting in focus

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TOKYO : The dollar drifted lower on Tuesday, extending the previous day's losses against the euro and sterling, as market jitters over the risks of a far-right French government receded.

The U.S. currency failed to get a lift from a rise in Treasury yields overnight, with investors awaiting a key retail sales report and comments from Federal Reserve officials to better gauge the timing and pace of interest rate cuts.

The Australian dollar hovered close to the middle of its trading range over the past month with the Reserve Bank of Australia seen holding rates steady later in the day.

The U.S. dollar index, which measures the currency against the euro, sterling and four other major peers, edged slightly lower to 105.26 in early Asian trading hours, continuing its retreat from Friday's 1 1/2-month high of 105.80.

The index's rally was mostly driven by a sharp euro selloff, after French President Emmanuel Macron called a shock snap election last week in response to his ruling centrist party's trouncing by Marine Le Pen's eurosceptic National Rally in the European Parliament elections.

"It's becoming clear that a hung parliament is the market's base case, and calmer heads would argue that any government that does involve Le Pen's RN party is unlikely to rock the fiscal boat too intently," said Chris Weston, head of research at Pepperstone.

"Le Pen has a Presidential election to win in 2027, and that can only happen if the party win the respect of the bond market."

The euro added 0.04 per cent to $1.0738, adding to the previous session's 0.26 per cent rise. Sterling gained 0.06 per cent to $1.2712.

The dollar was little changed at 157.66 yen.

The greenback has been pulled in both directions, with mild U.S. inflation readings contrasting with an overall hawkish stance by Fed officials at last week's policy meeting, when they trimmed their previous median projection for three quarter-point rate cuts this year to one.

Philadelphia Fed President Patrick Harker revealed on Monday that he is in the single-cut camp, but left the door open to changing his view depending on incoming data.

A long list of Fed officials take to the podium at various venues later in the day, including the Boston Fed's Susan Collins and the Richmond Fed's Thomas Barkin.

Well before that, the Reserve Bank of Australia is widely expected to hold rates steady for a fifth straight meeting later on Tuesday, with the majority of economi...

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