The dollar index held steady around 111.6 on Tuesday after facing pressure in recent sessions, supported by a hawkish Federal Reserve that is expected to keep raising interest rates until it sees compelling evidence that inflation is trending down. New York Fed Bank President John Williams said on Monday that while there are signs of cooling inflation, underlying price pressures remain elevated, reinforcing the case for further monetary tightening.
Meanwhile, the dollar fell half a percent on Monday and tracked a sharp decline in Treasury yields after softer-than-expected US manufacturing data signaled that tightening monetary conditions may be taking a toll on demand. This gave rise to speculations that the Fed may slow the pace of future rate increases. The dollar recouped some losses against the sterling, the yen and antipodean currencies, while remaining under pressure from a strong euro on expectations that the European Central Bank will tighten further.