The opinions of several Fed officials have weighed on the dollar ahead of the release of US Consumer Price Index (CPI) data tomorrow.

The US dollar continued to weaken in Tuesday's trading (July 11) as several Fed officials indicated that their monetary tightening cycle was nearing its end. The US Dollar Index (DXY) fell by approximately 0.2 percent, reaching a two-month low of 101.60. The greenback also declined against the yen, euro, and sterling.

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Federal Reserve President of San Francisco, Mary Daly, stated yesterday that the central bank may need to raise interest rates again to curb persistent inflation. However, she emphasized that the current monetary tightening cycle is nearing its "end phase."

Several other Fed officials expressed similar views. Although some analysts argue that the opinions of Fed officials are not new information, given that the Fed Chair has only hinted at the possibility of two more rate hikes, the market still chose to sell off the greenback collectively.

The US CPI inflation data release tomorrow is the market's focus following the disappointing Non-farm Payrolls release last Friday. However, in the current situation, even high inflation data carries the risk of being unable to lift the US dollar exchange rate sustainably.

"If we do get a strong CPI report (tomorrow), that may help market pricing for a second rate hike from the FOMC (after July) and drive the dollar a little bit higher," said Carol Kong, a currency strategist at Commonwealth Bank of Australia. "But I don't think any upside will be material given the fact that we are near the top of the FOMC tightening cycle."

"Broader pressure on the USD is likely to develop as cyclical headwinds mount and markets begin to anticipate easier Fed policy settings," said Shaun Osborne, chief FX strategist at Scotiabank.