The CME group’s FedWatch tool puts the probability of a December rate hike at 75 percent.
The dollar index, a gauge of its value versus six major peers, traded at 97.5, sitting shy of its 16-month high of 97.69 hit on Monday.
“The dollar has broken out of a 17-month range on the back of safe-haven buying, led by falling equity prices as well as the heavy sell-offs in the euro and sterling,” said Nick Twidale, chief operating officer at Rakuten Securities.
The Japanese yen traded at 113.99 on Tuesday, as the greenback gained 0.1 percent versus the yen. The yen touched a six-week low of 114.20 on Monday.
But analysts believe that the yen will strengthen if global risk sentiment worsens, thanks to its safe-haven status.”The yen will now have a greater safe haven pull than the dollar if equities witness a further correction. We see dollar/yen downside in that scenario,” added Twidale.
The euro gained 0.2 percent to trade at $1.1243 on Tuesday, after tumbling more than one percent versus the dollar on Monday.
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• EUR/USD Technical Analysis: Sellers Take Aim Below 1.12 Figure
The Euro looks likely to suffer deeper losses against the US Dollar after dropping through support in the 1.1268-1.1301 area, hitting the lowest level in over16 months. Prices accelerated downward after last week’s break of counter-trend support guiding a tepid upswing, as expected.
Form here, sellers are eying the next downside barrier in the 1.1110-32 zone, with a break below that confirmed on a daily closing basis exposing a minor barrier at 1.1024 (May 2017 high), followed by a more substantive threshold in the 1.0797-1.0863 region.
Alternatively, a reversal back above 1.1301 – likewise confirmed with a daily close – opens the door for another challenge of resistance at 1.1432. This level marks the intersection of a former support level as well as a falling trend line guiding the down move since late September.
• Palestinian militants kept up their most intense rocket fire on Israel since the 2014 Gaza war on Tuesday, drawing Israeli air strikes against Hamas’s television station and other targets.
The flare-up, in which five Palestinians, four of them militants, and a civilian in Israel were killed, threatened to derail efforts by the United Nations, Egypt and Qatar to broker a long-term truce and head off another major conflict in the impoverished enclave.
• The United States objects to China’s unilateral military steps in the South China Sea and the pace of U.S. freedom of navigation operations in the disputed waterway has increased, U.S. National Security Adviser John Bolton said on Tuesday.
He said also that U.S. President Donald Trump was prepared to hold a second summit with North Korean leader Kim Jong Un. The comments came after the release of a report detailing undeclared missile sites in the North that had been undergoing maintenance.
• Japan’s economy, which likely shrank in the third quarter, is set to grow more slowly in the coming year than previously thought, according to a Reuters poll of economists who cited the U.S.-China trade war as the biggest threat.
Asked to identify next year’s biggest economic risk, 16 economists picked “U.S.-China trade friction,” 10 selected “China’s economic slowdown” and eight said “New Japan-U.S. trade negotiations”, the survey found.
• Japan’s central bank has become the first among G7 nations to own assets collectively worth more than the country’s entire economy, following a half-decade spending spree designed to accelerate weak price growth.
The 553.6 trillion yen ($4.87 trillion) of assets the Bank of Japan holds are worth more than five times the world’s most valuable company Apple Inc. (AAPL.O) and 25 times the market capitalisation of Japan’s most valuable company Toyota Motor Corp. (7203.T).
Japan’s nominal gross domestic product for the April-June, the latest data available, was an annualized 552.8207 trillion yen. The reading for July-September, due on Wednesday, is expected to show a contraction after natural disasters.
• Oil prices fell by around 1 percent on Tuesday, with Brent crude slipping below $70 per barrel and WTI below $60, after U.S. President Donald Trump put pressure on OPEC not to cut supply to prop up the market.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $59.22 per barrel at 0740 GMT, down 70 cents, or 1.2 percent from their last settlement.
International benchmark Brent crude oil futures LCOc1 were at $69.41 per barrel, down 71 cents, or 1 percent, from their last close.
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