The U.S. Dollar Dropped On Tuesday In Range-bound Trading

The U.S. dollar dropped on Tuesday in range-bound trading on the eve of an expected interest rate cut from the Federal Reserve, weakened by a drop in oil prices and a stronger euro.

Oil prices fell about 6 percent on Tuesday after Saudi Arabia's energy minister said the kingdom had completely restored its petroleum production, after an assault over the weekend which closed down 5 percent of global oil output. That reversed a number of the dollar's profits on Monday when investors hurried into safe-haven assets.

The euro was up 0.59percent at $1.1065 (EUR=-RRB-, following an influential survey, revealed that a rake in German investor confidence. The ZEW index rose to -22.5 in September versus predictions of -37 and the August reading of -44.1.

Thierry Wizman, international interest rates and currencies strategist at Macquarie Group, stated he had been visiting bidding in the foreign exchange market. "It is possibly the euro is doing a bit better," he explained. "You also had some fantastic data in Europe also that has ignited a little the euro rally now also."

While most investors are expecting the Fed to declare a 25 basis point rate cut after the end of its own two-day coverage meeting on Wednesday, some think it might be the last rate decrease for some time absent more proof of a U.S. economic downturn.

"When the Fed does reduce 25 basis points, we then believe it's going to be the last time before we really do see signs of a downturn," Brown Brothers Harriman strategists said in a notice.

The overnight rate, or the cost for banks and Wall Street traders to borrow bucks, surged to 10 percent on Tuesday, the maximum level since at least January 2003, based on Refinitiv data.

"This morning's capital squeeze has set some upward pressure earlier in the buck, but that's unlikely to be a longer-term motorist," explained Erik Nelson, money strategist, in Wells Fargo (NYSE: WFC) Securities in New York.

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