dollar: the dollar is slowing down after falling from a 19-month high

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TOKYO (Reuters) – The U.S. dollar nursed its wounds on Tuesday after its biggest decline in nearly three weeks against its major peers, as Federal Reserve policymakers eased investor fears of a very quick tightening monetary policy.

The Australian dollar remained firm after its biggest jump in eight months on the night before a policy decision by the Reserve Bank of Australia later on Tuesday, in hopes that Governor Philip Lowe will capitulate on his earlier belief that a Interest rate hike this year was unlikely.

The dollar index, which measures the greenback against six rivals, rose 0.05% to 96.715, making barely a dent in Monday’s 0.59% plunge. It was at a nearly 19-month high of 97.441 at the end of last week, as investors pondered the chances that the Fed could raise rates by 50 basis points in March.

Trading in Asian hours may be subdued with several markets on holiday for the Lunar New Year.

A chorus of Fed officials backed a March rate hike on Monday, but spoke cautiously about what might come next.

Money market prices rose a quarter point in March and another four points by the end of the year.

“Recent remarks from the Fed appeared to push the odds of a rate hike back 50 basis points in March,” focusing on economic data this week for clues on the pace of policy tightening, including the closely watched monthly payroll report on Friday, TD Securities strategists wrote in a note.

US payrolls are expected to show a gain of 153,000 jobs in January, from 199,000 in December, with the unemployment rate steady at 3.9%, according to a Reuters poll.

Meanwhile, the Aussie was little changed at $0.7067 after climbing 1.06% on Monday, its biggest gain since early June.

Australian inflation is rising at the fastest annual rate since 2014, suggesting price pressures are not as benign and transitory as policymakers thought.

“This is impractical and unlikely the RBA can continue to adopt a dovish stance,” TD Securities strategists wrote, predicting a rise in August or sooner.

A Reuters poll of economists puts the odds of a first hike in November.

The Bank of England holds its policy meeting on Thursday, with a Reuters poll predicting a second rate hike in less than two months after UK inflation hit its highest level in nearly 30 years.

The European Central Bank also meets on Thursday. While no policy change is expected, analysts said the Fed’s impending rate hikes would narrow the ECB’s window for action.

The euro slipped 0.11% to $1.12235, after jumping 0.80% on Monday.

The pound was stable at $1.34385 after gaining 0.33% in the previous session.

The greenback was little changed at 115.125 yen.

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