Investing.com – The U.S. dollar stabilized Tuesday, while the euro attempted a comeback after the previous session’s hefty losses. 

At 04:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 100.575, just above a 12-month low.

Dollar stabilizes after selloff 

The US currency is stabilizing after last week’s selloff in the wake of the Federal Reserve rate cut.

The Fed started its rate-cutting cycle with a hefty 50 basis-point reduction, and now attention turns to the extent of the central bank’s further cuts this year.

Traders are now betting that there is a roughly 53% chance the Fed will bring rates down by a half-point again at its next meeting in November, according to the CME Group’s (NASDAQ:) closely-monitored FedWatch Tool.

Markets will likely be following comments on Tuesday from Fed Governor — and sole dissenter to the size of last week’s rate cut — .

This month’s release is due later in the session, but most eyes will be the release of the Fed’s preferred inflation gauge, , on Friday for more clues. 

Euro rebounds after selloff

In Europe, traded 0.2% higher to 1.1135, attempting to rebound following a fall of around 0.5% overnight after data released on Monday showed that eurozone business activity contracted sharply this month.

The slump appeared broad-based with Germany, Europe’s largest economy, seeing its decline deepen while France – the second biggest – returning to contraction.

The cut rates for the second time this year earlier this month last week, and further signs of economic weakness could lift the chances of another rate cut in October.

traded largely unchanged at 1.3347, not far removed from last week’s 2-1/2-year high after the Bank of England kept rates unchanged.

“We do not see GBP/USD positioning as particularly stretched and given perhaps a softer dollar environment, the direction of travel continues to be towards 1.35,” said analysts at ING, in a note.

Yuan gains after stimulus news

traded 0.2% lower to 7.0356, with the pair falling to its lowest level since May 2023 after the Chinese government announced a barrage of stimulus measures, raising hopes of a recovery in Asia’s biggest economy.

rose 0.6% to 144.51, after purchasing managers index data showed a sustained decline in , while the services sector grew further. 

The Bank of Japan held interest rates steady last week, and said it expected inflation and economic growth to steadily increase.

fell 0.2% to 0.6825 after the kept interest rates steady as widely expected, while reiterating its determination to tame stubborn inflation.

Investing.com– Most Asian currencies advanced on Tuesday with the Chinese yuan supported by Beijing announcing more stimulus measures, while the Australian dollar rose in anticipation of hawkish signals from the Reserve Bank.

A softer U.S. dollar aided regional markets, as the greenback remained subdued after a bumper interest rate cut by the Federal Reserve last week. Focus this week is on more cues from the Fed, as well as key inflation data. 

Sentiment towards regional markets was further boosted by the Chinese government rolling out more stimulus measures aimed at shoring up laggard economic growth. 

Chinese yuan hits 16-mth high on stimulus cheer 

The Chinese yuan firmed on Tuesday, with the pair falling 0.2% to its lowest level since May 2023. 

Chinese markets rallied after the government announced a barrage of stimulus measures, with standouts being a reduction in reserve requirements for banks, along with lower mortgage rates to boost the property market. 

The move ramped up hopes over a recovery in Asia’s biggest economy, which could then spill over into the region. But recent economic readings showed a steady slowdown in activity through most of the third quarter. 

Lower rates also herald more weakness in the yuan, although recent government intervention kept the currency strong. 

The yuan’s offshore pair also fell 0.2% to a 16-month low. 

Australian dollar rises with RBA on tap

The Australian dollar firmed, with the pair rising 0.2% and coming close to a 2024 peak.

The RBA is widely expected to at the conclusion of a meeting later in the day. 

But recent signs of sticky inflation and a robust labor market are expected to draw a hawkish stance from the central bank, with the RBA likely to signal rates will remain high for longer. 

Such a trend makes the RBA an outlier among its global peers, but also benefits the Aussie. 

Broader Asian currencies firmed. The Japanese yen’s pair steadied after falling sharply in overnight trade. Purchasing managers index data showed a sustained decline in Japanese activity, while the grew further. 

The South Korean won’s pair fell slightly. 

The and steadied in Asian trade after logging a slow start to the week.

The Singapore dollar’s pair fell slightly, while the Indian rupee’s pair pulled back further from record highs.