The U.S. dollar edged lower but held on to most of the previous day’s gains, after leaping on Federal Reserve officials’ hints at aggressive rate hikes and drawing support amid a U.S.-China flare-up over Taiwan.
The dollar index, which tracks the greenback against six major peers, has softened from a two-decade high in mid-July as investors reined in expectations of Fed rate hikes.
But a trio of Fed officials signaled the central bank remains “completely united” on increasing rates to a level that will put a dent in the highest U.S. Inflation since the 1980s, lifting the dollar index 0.8% that day.
Frictions after the highest level U.S. visit to Taiwan in 25 years are likely to help support the safe haven U.S. Dollar for now, currency analysts said.
China furiously condemned House of Representatives Speaker Nancy Pelosi’s visit and began six days of military drills surrounding Taiwan, as Pelosi hailed the self-ruled island as “one of the freest societies in the world”.