Investing.com - The US dollar weakened on Tuesday alongside Treasury yields, with investors perceiving a slight dovish shift in the tone of Federal Reserve officials.
The yen maintained minor gains, with the escalating conflict in the Middle East prompting investors to opt for safe-haven assets. It was last recorded trading at 148.34 per dollar. The Swiss franc also experienced gains, edging higher to 0.9045 against the dollar.
Early trading in Asia saw the euro increase by 0.1% to $1.0580. The Israeli shekel stabilized at 3.95 to the dollar, just shy of an almost eight-year low, following the central bank's commitment to sell $30 billion in foreign exchange.
Investors are preparing for a protracted conflict after a weekend attack by Palestinian militants, and Israel's retaliation resulted in over 1,500 fatalities.
However, the sentiment and US rate forecasts took a turn following comments from two Fed officials. They suggested that the recent bond selloff could eliminate the need for further rate hikes.
Dallas Fed President Lorie Logan stated, "If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the Fed funds rate," marking a significant departure from previous hawkish statements.
Fed Vice Chair Philip Jefferson advised the central bank to "proceed carefully" considering the recent yield surge. Futures-implied pricing for another Fed rate hike this year dropped from over 40% last week to around 26% on Monday.
Ten-year Treasury yields, which have been surging, plummeted over 13 basis points to 4.63% at the opening in Tokyo on Tuesday due to both rate relief and safe-haven investment following the closure of the cash market for Columbus Day on Monday.
The British pound was slightly stronger against the dollar at $1.2244. Against the Australian and New Zealand dollars, the greenback was marginally weaker, with the Aussie up 0.2% to $0.6420 and the kiwi up 0.2% to $0.6031.
With China returning from a week-long break, traders are refocusing on the daily fix of the yuan's trading band, which has been consistently firmer than market expectations for several weeks. Prior to the onshore open, the yuan maintained overnight gains, trading just above its 50-day moving average in the offshore market at 7.2876 per dollar.