U.S. Dollar Drops As Powell Signals Progress On Softening Of Price Pressures

The U.S. dollar weakened against its major counterparts in the New York session on Tuesday, as Federal Reserve Chair Jerome Powell signalled progress on cooling in inflation.

Speaking at the ECB Forum in Portugal, Powell said that policy makers want to understand whether recent weaker inflation readings indicate a true picture of underlying price pressures.

The Fed chief acknowledged that the latest inflation readings suggest that Fed officials are getting back on the disinflationary path.

"We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy," Powell noted.

Powell's remarks reinforced hopes that the Fed will start reducing interest rates this year.

The dollar gained traction in the previous session as the Supreme Court ruled that presidents have absolute immunity from prosecution for core official acts.

The greenback eased to 161.26 against the yen and 0.9031 against the franc, from an early 38-year high of 161.74 and nearly a 5-week high of 0.9049, respectively. The greenback is poised to challenge support around 147.00 against the yen and 0.88 against the franc.

The greenback fell to 1.0746 against the euro and 1.2685 against the pound, from an early 4-day high of 1.0709 and a 5-day high of 1.2615, respectively. The greenback is likely to face support around 1.10 against the euro and 1.31 against the pound.

The greenback retreated to 1.3687 against the loonie, 0.6670 against the aussie and 0.6079 against the kiwi, from an early 2-week high of 1.3755, 4-day high of 0.6634 and a 1-1/2-month high of 0.6047, respectively. The currency is seen finding support around 1.34 against the loonie, 0.68 against the aussie and 0.63 against the kiwi.