Dollar steady

The dollar steadied on Tuesday ahead of US inflation data, with Middle East tensions lifting oil prices.

The yen was calm amid caution over possible intervention and after policymakers’ comments on state pension fund allocations.

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The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, eased 0.09 percent to 101.18.

Inflation risks remain in the spotlight with the release of US June CPI data on Tuesday.

June PPI gauges follow the next day, along with Fed Chair Kevin Warsh’s first semiannual testimony before Congress.

Concerns over escalating tensions between the United States and Iran returned to the fore.

President Donald Trump said on Monday Washington was reinstating a naval blockade on Tehran.

He added that the US would ensure the Strait of Hormuz remained open for a fee following fresh exchanges of missile and drone strikes.

US and Iranian forces exchanged heavy missile and drone assaults at the weekend.

Tehran struck US facilities across the Gulf on Sunday and said it had again closed the vital Strait of Hormuz shipping route.

Oil prices climbed nearly 3 percent on Tuesday to their highest point in four weeks after the US said it would reimpose a naval blockade, heightening uncertainty about energy flows.

The euro was up 0.1 percent against the dollar at $1.1392 and sterling gained 0.09 percent to $1.3358.

Meanwhile, Federal Reserve Governor Christopher Waller said rates may need to rise “in the near term” if data shows inflation remaining well above the central bank’s 2 percent target.

A core CPI reading of 0.3 percent or higher would likely imply that the Fed’s preferred core PCE deflator is also running at 0.3 percent or above, depending on PPI data due later in the week.

This was noted by Ray Attrill, head of FX strategy at National Australia Bank, in a podcast.

“That may well be a trigger for a Fed rate hike as early as the July meeting,” Attrill said.

Economists’ median estimate for the June core CPI was 0.2 percent growth month-on-month.