Dollar wallows near 14-month low as political turmoil weighs

LONDON - 1 August 2017: The dollar edged up against a trade-weighted currency basket on Tuesday, but held close to a 14-month low as investors added to bets that political turmoil in Washington will hit prospects of another Federal Reserve rate hike in coming months.

Uncertainty was expected to carry on weighing on the greenback, after President Donald Trump ousted recently hired White House communications chief Anthony Scaramucci on Monday.

"I think the short dollar trade is still the broad consensus trade in the financial markets,," said Esther Maria Reichelt, an FX analyst at Commerzbank in Frankfurt.

"But we are approaching important levels against other currencies, such as 1.20 on the euro, which may prompt some concerns from other central banks."

In early trade, the euro rose to $1.18460, its highest since January 2015. It has risen more than 12 percent against the dollar this year, with most of the gains coming in the last three months.

Bets on another quarter point U.S. rate increase have whittled down to around 47 percent compared to a 50 percent probability a month ago, according to CME's Fedwatch tool.

The index measuring the greenback's value against a basket of six major currencies fell to its lowest levels since May 2016 on Monday and was trading a shade above that at 92.92 on Tuesday.

The index fell in July to mark its fifth consecutive monthly decline, the longest such stretch since December 2010 through April 2011.

The U.S. core personal consumption expenditures (PCE) price index is due later on Tuesday, with the highlight of the U.S. data week being Friday's jobs report.