By Karen Brettell
(Reuters) -The U.S. dollar held onto earlier losses on Tuesday after Federal Reserve Chair Jerome Powell said the U.S. central bank was in no rush to cut its short-term interest rate again.
Powell said in testimony before the Senate Banking, Housing and Urban Affairs Committee that the view on rates reflected the U.S. economy being “strong overall,” with low unemployment and inflation that remains above the Fed’s 2% target.
Consumer price data for January is due on Wednesday and is expected to show inflation remained sticky during the month.
Powell will also testify before the House Financial Services Committee on Wednesday.
Futures priced in 35 basis points’ worth of Fed rate cuts by the year-end, little changed from before Powell’s comments, which implies one 25 bps cut and only a partial chance of a second.
The U.S. dollar index was last down 0.17% at 108.18.
Traders are also watching announcements on tariffs by U.S. President Donald Trump, which some analysts say may lead to further increases in U.S. inflation and dent global growth.
“The threat of more U.S. tariffs remains, also against the European Union. Retaliation could even lead to a tail risk scenario of a global trade war,” said Athanasios Vamvakidis, global head of forex research at BofA.
“Even if the worst is avoided, we are concerned that prolonged uncertainty will have negative implications for the global economy,” he added.
Trump on Monday said he would announce plans to impose reciprocal tariffs on other countries over the next two days, doubling down on comments he made on Sunday.
On Sunday Trump said he would introduce new 25% tariffs on all steel and aluminum imports into the U.S., on top of existing metals duties.
The European Union said it would respond with “firm and proportionate countermeasures”.
The euro was last up 0.22% at $1.033.
The Canadian dollar weakened 0.03% versus the greenback to C$1.43 per dollar.
Canada, Brazil, Mexico, South Korea and Vietnam are the biggest sellers of steel into the U.S., according to American Iron and Steel Institute data, while Canada is the dominant supplier of imported aluminum.
The Japanese yen weakened 0.3% against the greenback to 152.45 per dollar. It hit 150.93 on Friday, its highest since December 10.
The Australian dollar strengthened 0.1% versus the greenback to $0.6281.
Australian Prime Minister Anthony Albanese said on Tuesday Trump has agreed to consider exempting Australia from his steel and aluminum tariffs, in what Albanese called a constructive phone call with the U.S. president.
In cryptocurrencies, bitcoin fell 0.40% to $97,016.65.
(Reporting by Karen Brettell; Additional reporting by Stefano Rebaudo; Editing by Bernadette Baum, David Evans and Christina Fincher)
