Dollar Down Ahead of ECB Interest Rate Decision

© Reuters

By Doris Yu

AiVIF.com – The dollar was down on Tuesday morning in Asia as the Nord Stream pipeline may reopen following maintenance, and the European Central Bank may deliver a more aggressive rate hike.

The US Dollar Index that tracks the greenback against a basket of other currencies edged down 0.14% to 106.53 by 11:33 PM ET (3:33 AM GMT).

The USD/JPY pair inched down 0.07% to 138.09.

The AUD/USD pair gained 0.32% to 0.6916, and the NZD/USD pair was up 0.53% to 0.6262. The Reserve Bank of Australia’s July policy meeting showed the need for higher interest rates to curb rising inflation, even after recent rate hikes, as unemployment drops to its lowest level in nearly 50 years.

The USD/CNY pair remain unchanged, while GBP/USD pair was up 0.28% to 1.2028.

The European Central Bank may consider raising interest rates by a larger-than-expected 50 basis points at their meeting on Thursday due to the worsening inflation backdrop.

In addition, Russia is poised to restart gas exports to Europe on Thursday after the completion of the Nord Stream pipeline’s maintenance.

"If we do see Russian gas flows resume tomorrow, that will be good news for the euro/dollar and in the near term, euro can get a little boost and get away further from parity," said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).

"But I am still worried about the euro/dollar, I think downsides still persist ... the potential hawkish pivot from the ECB may not be able to give sustained support.

Bank of England Governor Andrew Bailey said on Tuesday that the BoE could raise rates by as much as 0.5% at its next rates meeting to contain inflation.

On the data front, the Bank of Japan and the European Central Bank are due to release their interest rate decisions on Thursday.