Dollar Nears Three-Week High Amid Inflation Data Anticipation

The dollar traded close to a three-week high against major currencies on Tuesday, as traders anticipated U.S. inflation data set for release later in the day. This data is expected to offer insights into the future path of monetary policy in the U.S. The greenback's strength was further supported by elevated Treasury yields, with investors contemplating the implications of Jerome Powell's potential departure from the Federal Reserve amid ongoing criticism from President Donald Trump.

Currency movements were muted despite China's economic growth of 5.2% last quarter, which marginally exceeded analysts' expectations. Bitcoin moved away from its record peak, trading around $118,215 following a significant surge in anticipation of favorable legislation for the cryptocurrency sector. The dollar maintained its strength against the yen, reaching levels not seen since June, while the euro showed slight recovery against the dollar.

Economist forecasts suggest a rise in both headline and core inflation, which could challenge the Fed's stance on interest rates. Meanwhile, tension lingers as Trump's calls for leadership changes at the Fed intensify, reflecting speculation of rate cuts by year-end. In contrast, despite a slight slowdown, China's economic resilience underpins market optimism, though challenges remain for Beijing.

(With inputs from agencies.)