LONDON\/SINGAPORE (Reuters) – The dollar fell slightly on Tuesday as investors awaited U.S. inflation data, while China’s yuan slipped to a six-month low after the central bank lowered a short-term lending rate to boost the economy.<\/p>\n\n\n\n
The euro was up 0.37% to $1.079 on Tuesday, after touching its highest since May 23 earlier in the session at $1.081.<\/p>\n\n\n\n
That helped push the\u00a0dollar index, which measures the currency against six peers, down 0.26% to 103.32.<\/p>\n\n\n\n
U.S. consumer price inflation (CPI) data is due out at 1230 GMT (8:30 a.m. ET) and could influence the Federal Reserve as it starts its two-day policy meeting, with an interest rate decision due on Wednesday.<\/p>\n\n\n\n
The dollar was down in part because the market was “priced for a pause” from the Fed tomorrow, said Jane Foley, head of FX strategy at Rabobank.<\/p>\n\n\n\n
The Fed lifted its target rate range to 5% to 5.25% in May, but traders think there is a 77% chance the Fed will hold it steady this week. Traders broadly expect another 25 bp hike in July, after Fed officials hinted at a so-called skip.<\/p>\n\n\n\n
“What’s going to be interesting today is looking at that CPI, especially the core number, because there will be a bit of fine tuning (of market expectations) ahead of the Fed\u2019s meeting,” Foley said.<\/p>\n\n\n\n
In Asia, China’s yuan fell to a six-month low after the central bank lowered a short-term lending rate for the first time in 10 months, in a bid to restore market confidence and prop up its stalling post-pandemic recovery.<\/p>\n\n\n\n
The\u00a0onshore yuan\u00a0bottomed at 7.168 per dollar, its lowest since last November, and last traded at 7.152.<\/p>\n\n\n\n
Its offshore counterpart weakened to a new six-month low of 7.178, before paring its losses slightly.<\/p>\n\n\n\n
The cut reflects “growing concerns among policymakers about the health of China\u2019s recovery”, said Julian Evans-Pritchard, head of China economics at consultancy Capital Economics, in a note to clients. “It is likely to be followed by wider easing.”<\/p>\n\n\n\n
Sterling jumped on Tuesday after employment data came in much stronger than expected, with wages rising sharply, adding to concerns about inflation.<\/p>\n\n\n\n
The pound was up 0.46% at $1.257 as traders bet the Bank of England would have to raise interest rates further than previously expected. It remained below the one-month peak of $1.26 hit on Monday, however.<\/p>\n\n\n\n
Against the Japanese yen, the dollar slipped very slightly to 139.57.<\/p>\n\n\n\n
The Bank of Japan is due to announce a monetary policy decision on Friday and is expected to maintain its ultra-dovish stance and yield curve control settings.<\/p>\n\n\n\n
The\u00a0Aussie\u00a0dollar rose more than 0.4% to its highest since May 11 at $0.679, and was last at $0.678.<\/p>\n