News daily forex discusses the weakening dollar. The dollar weakened to the lower end of its recent range against major currencies on Tuesday. This is because the greenback was hit by weak US factory data overnight, on market bets of faster monetary policy normalization in other countries. The dollar index, which measures the greenback against a basket of six other currencies, weakened 0.05% to 93.894 from Monday. The weaker dollar index has oscillated for the past three weeks between 93.671 and a one-year high of 94.563 reached last Tuesday. But over the past week, the trend has been lower. With the Federal Reserve tapering stimulus early next month already priced in along with the first interest rate hike next year. A recovery in risk sentiment will also weigh on the safe-haven US currency. Elsewhere, Bank of England Governor Andrew Bailey sent a fresh signal for an early UK interest rate hike by saying on Saturday that the central bank "must act" to counter rising inflation risks. In New Zealand, bets for faster policy normalization were fueled on Monday by data showing the fastest consumer price inflation in more than a decade. The UK and New Zealand led the rise in short-term bond yields globally, with rates in Europe and Australia rising relatively higher than in the US, which weighed on the dollar. The suggestion that this ‘transitory’ inflation will persist for longer than previously expected has been a key catalyst as “markets recalibrate rate hike expectations in most jurisdictions,” Westpac strategists wrote in a research note. However, the US is likely to be insulated by energy market headwinds that “cast a persistent cloud over the outlook for a rebound in Europe and China,” with the result “leading to front-end yield spreads continuing to drift in favour of the USD,” they said. They added that a pullback in the dollar index should be limited to 93.70. In addition, Westpac remains bullish on the New Zealand kiwi dollar, which is not part of the dollar index, targeting a rise to $0.74 by year-end, and recommends buying any dips to $0.6985. The kiwi rose 0.11% to $0.7093, edging back toward a one-month high of $0.7105 hit on Monday. The Aussie dollar rose 0.09% to $0.74225, near a more than one-month high of $0.7440 touched late last week, even after the Reserve Bank of Australia's September meeting showed on Tuesday that policymakers were concerned that tighter policy could hurt the labor market. Sterling rose 0.13% to $1.37455, near a one-month peak of $1.3773 hit on Friday. The euro rose 0.09% to $1.16205, near the top of this month's trading range. Against the safe-haven yen, the dollar was little changed at 114.275, but not far from a nearly three-year high of 114.47 touched on Friday. U.S. manufacturing output has been hurt as a persistent global shortage of semiconductors weighed on motor vehicle output, providing further evidence that supply constraints are hampering economic growth. "Our strong USD forecast published in early July reflected, among other things, better US economic performance, but the drivers of the USD may be changing," Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note. A surge in global inflation and interest rates could support the USD as a safe haven if, short-term interest rates are priced in a global monetary tightening cycle so strongly that they force equities to correct lower, with evidence of that scenario likely seen in the declines in USD/JPY and AUD/JPY, he said.