Kevin Buckland

TOKYO, Reuters – After its largest drop in three weeks against its major peers, the U.S. Dollar reacted to investor concerns about a rapid tightening by Federal Reserve policymakers on Tuesday.

After its largest jump in 8 months overnight, the Australian dollar held firm ahead of a Reserve Bank of Australia policy determination later Tuesday. There is growing expectation that Governor Philip Lowe will give up on his earlier conviction that an increase in interest rates this year was not likely.

The index, which compares the greenback to six competitors, ticked 0.05% higher, at 96.715. It barely made a dent Monday’s 0.5% plunge. As investors speculated about whether the Fed would raise rates by 50 basis point in March, it was almost at its 19-month peak of 97.441 last week.

With several markets closed for the Lunar New Year, trading in Asian hours could be slowed.

On Monday, a chorus of Fed officials supported a rate increase in March but expressed caution about the future.

In the money market, there is a quarter-point increase for March and four by year-end.

“Recent Fed remarks seemed to push back against the odds for a 50bprate hike in March,” TD Securities strategists wrote. The focus is now on economic data this Week for clues as to the pace and direction of policy tightening. This includes the closely-watched monthly payrolls report that was released Friday.

A Reuters poll shows that U.S. payrolls should show a rise of 153,000 jobs in January. This is down from December’s 199,000, while the unemployment rate will remain at 3.9%.

The price was unchanged at $0.7067, after it soared 1.06% Monday. This is its largest gain since June.

Inflation in Australia is rising at an annual rate of 4%, the highest pace recorded since 2014. This suggests that price pressures may not be as temporary and benign as it was thought by policymakers.

According to TD Securities, “It’s impractical and likely the RBA will continue to maintain a dovish stance,” they wrote. They predicted a hike in August.

According to Reuters, economists believe that November will see the first increase.

On Thursday, the Bank of England will hold its policy meeting. A Reuters poll predicted that a second rate rise would be made in under two months following a spike in inflation in Britain.

Also, on Thursday, European Central Bank meets. Although no changes are expected in policy, analysts believe the Fed’s looming rate rises will reduce the ECB’s options for taking action.

Following a jump of 0.80% on Monday, the euro dropped 0.11% towards $1.12235.

After gaining 0.3% during the previous session, Sterling was unchanged at $1.34385

The greenback was not significantly affected at 115.125 Japanese yen.