Tuesday's trading saw the US dollar fluctuate within a narrow range as investors assessed Middle East developments and prepared for a week full of speeches by central bank officials, including Federal Chair Powell, to get a sense of the direction of monetary policy.
Investors were on guard for any indications of intervention from the Japanese government as the yen was held near the crucial 150-to-a-dollar level.
The yen's exchange rate last stood at 149.60 to the dollar after falling as low as 150.17 on October 3 — its lowest level in a year — before briefly strengthening.
Masato Kanda, the top financial diplomat in Japan, said that despite the recent decline, the yen is still seen as an asset of safety like the US dollar and the Swiss franc and is currently enjoying increased demand as a result of the Middle East war.
On Monday, amid concerns over Israel's conflict with the Palestinian militant group Hamas, the shekel of Israel crossed the crucial threshold of four against the US dollar for the very first time since 2015. During Tuesday's erratic trading, it last traded at $4.0176 a dollar.
According to Charu Chanana, a market strategist from Saxo in Singapore, geopolitics will continue to be a major influence on the stock market as investors assess the potential dangers of an escalation with the US government's strategy to prevent the conflict from spreading to the rest of the Middle East.
The dollar index, which compares the value of the dollar to six other currencies, rose 0.056% to 106.32 after falling 0.36% on Monday.
During a hectic week of talks by regional bank heads, investors' focus will be firmly on US Fed Chairman Jerome Powell, who is scheduled to speak on Thursday. Prior to the Fed's meeting on October 31 – November 1, Fed officials will go into a complete shutdown period on October 21.
Patrick Harker, president of the Federal Reserve Bank of Philadelphia, stated on Monday that the central bank shouldn't put more strain on the economy by raising borrowing costs.
The dollar is probably currently stuck in a range, according to OCBC's Christopher Wong, a currency strategist.
Higher rates for a longer period of time, relative US growth resilience, and concerns about escalating conflict are a few of the elements that could boost the dollar, according to Wong.
Less alarmist Fed remarks, however, imply that the Fed may be preparing for an extended halt. This could limit the dollar's upside.
The attention will also be on British pay statistics, where average weekly salary growth is predicted to decrease to 8.3% in annual terms from 8.5% in July in the three months leading up to August, according to a poll.
Michael Hewson, chief market analyst from CMC Markets in London, said that the August statistics could raise concerns about another rate increase at the next Bank of England conference in November, and given the significant decrease in consumer income over the last 18 months that has left consumers worse off, these worries appear overblown and actually shouldn't be an issue in the short future.
After rising 0.6% on Monday, the value of the pound was last at $1.2199, down 0.14% for the day. The pound has decreased by 3.7% in one month.
The euro was trading at $1.0545, down 0.14%.
In an interview with a Dutch publication, Philip Lane, the top economist of the European Central Bank, said that the central bank would need some time, probably until next spring, before inflation returns to its 2% target.
The Australian dollar increased 0.17% to $0.6353. Australia's central bank contemplated hiking rates at its most recent meeting but decided there was not enough new data to justify a change.
The New Zealand dollar dropped 0.47% to $0.5901 after statistics on Tuesday revealed consumer inflation reached a two-year low, reducing the expectation that the central bank will raise the cash rate again in November.