By Yasin Ebrahim

Investing.com – The dollar took a breather Wednesday from its recent melt-up, but will remain “buy on dips” story as traders position for a liftoff in rates as soon as mid-2022.

The, which is a measurement of the greenback in relation to a basket of six major currencies that has been trade-weighted, dropped by 0.11% to 95.81.

“The last few day’s upmove points towards a little breather [in the dollar],” Commerzbank FX and EM analyst Antje Praefcke said in a note.

“However, that would probably be an opportunity for the dollar bulls to buy the dollar at lower levels again. For me too the dollar remains a buy on dips’ short-term.,” Praefcke added.

A week following a more than anticipated inflation report, the bullish outlook for the greenback is a strong indication that the Federal Reserve will soon raise interest rates.

“[T]he US inflation data for October surprised clearly on the upside last week …  this provided further limited support for the rate expectations,”{{0|Commerzbank said in a note.”

Fed speech has been more hawkish lately, and St. Louis Fed President Jim Bullard (who tends toward being dovish) warned of the possibility of inflation rising for longer than expected.

“If inflation just happens to go away, we’re in great shape for that. We’re set up for that,” Bullard said in an interview with Bloomberg on Tuesday.  

“But if inflation doesn’t go away as quickly as many are currently anticipating, then it’s going to be up to the Committee to keep inflation under control going forward,” he added.

However, speculation has swirled about whether President Joe Biden would give Fed Chairman Jerome Powell permission to lead the U.S. central banking.

Biden reportedly altered the plans for his nomination as Fed Chair to be before Thanksgiving instead of before the weekend.