The dollar index (DXY00) on Tuesday fell by -0.12%. Tuesday's -3% plunge in WTI crude oil prices to a 7-week low lowered inflation expectations, which could prompt the Fed to pursue easier monetary policy, a bearish factor for the dollar. Also, lower T-note yields on Tuesday weakened the dollar's interest rate differential, which was negative for the dollar.
The dollar recovered from its worst level on Tuesday amid better-than-expected US economic news. The Apr trade deficit eased to -$55.9 billion from -$56.6 billion in Mar, narrower than the -$56.1 billion expected. Also, May existing home sales rose +3.2% m/m to a 5-month high of 4.17 million, stronger than expectations of 4.07 million. In addition, Tuesday's stock slump boosted liquidity demand for the dollar.
