WASHINGTON (dpa-AFX) - Despite a fairly strong start, the U.S. dollar retreated on Tuesday amid prospects for another reduction in interest rates.
While fading optimism about U.S.-China trade deal lifted the dollar early on in the session, comments from Federal Reserve Bank of St. Louis President James Bullard that he would favor an interest rate cut as an insurance, given the risk of a greater-than-expected slowdown weighed on the currency and pushed it lower.
Bullard said U.S. policy makers are facing too-low rates of inflation and the risk of a greater-than-expected slowdown.
Rising risks to growth 'may make it more difficult for the Federal Open Market Committee to achieve its 2% inflation target,' Bullard said.
The dollar index eased to 98.21 and was last seen trading at 98.29, down 0.17% from previous close.
Against the Euro, the dollar was down marginally at 1.1035, despite having strengthened to 1.0992 a unit of euro earlier in the day.
In economic news from Europe, the German ZEW economic sentiment index for October came in at -22.8 as compared to -27.0 expected.
The Euro-zone ZEW economic sentiment indicator for October arrived at -23.5 vs. -33.0 expected.
The Sterling gained against most major rivals riding on reports that a draft legal text for Brexit was being readied.
The Sterling rose to $1.2777, gaining nearly 1.4% over previous close.
According to reports, EU negotiator Michel Barnier said the teams are working hard and an agreement, even if it will be difficult, is still possible this week.
Data from the Office for National Statistics showed that the UK unemployment increased and employment declined in three months to August.
The number of people in work fell 56,000 to 32.69 million and the level of unemployment increased by 22,000 to 1.31 million in three months to August.
The Japanese yen weakened to 108.85 a dollar, down more than 0.4% from Monday's settlement, after data showed Japan's industrial production declined in August.
Final data from the Ministry of Economy, Trade and Industry showed Japan's industrial production dropped 1.2% month-on-month in August, reversing a 1.3% rise in July.
Against Swiss franc, the dollar was up at 0.9990, and against the Aussie, it was up 0.3% with the Aussie-Dollar pair at 0.6755.
The Loonie was up against the dollar. The loonie was higher by about 0.25% at 1.3202.
Home sales in Canada's big cities continued a rebound in September with a 15.5% increase in sales compared with a year ago, the report from the Canadian Real Estate Association showed.
The Federal Reserve Bank of New York released a report on Tuesday unexpectedly showing a modest acceleration in the pace of growth in regional manufacturing activity in the month of October.
The New York Fed said its headline general business conditions index edged up to 4.0 in October after dipping to 2.0 in September, with a positive reading indicating an increase in regional manufacturing activity.
The modest uptick came as a surprise to economists, who had expected the general business conditions index to slip to 0.8.
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