The dollar weakened in early European trade Tuesday, slipping to multi-month lows against many of its peers, as traders look to the release of closely-watched nonfarm payrolls data later in the week for clues surrounding the Federal Reserve’s policy thinking.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 89.820, falling back below 90 from as high as 90.447 on Friday, when the Fed’s favourite measure of U.S. inflation posted a sharper rise than expected.
EUR/USD traded largely flat at 1.2224, not far from a near five-month high of 1.2266 touched last week, while USD/JPY fell 0.1% to 109.50, after climbing as high as 110.20 on Friday.
Oil prices rose on Tuesday, with Brent topping $70 and trading at its highest since March, as optimism grew over the fuel demand outlook during the summer driving season of the United States, the world’s top oil consumer.
Prices were also boosted after data from China showed that factory activity expanded at its fastest this year in May.
Brent crude futures for August gained 94 cents, or 1.4%, to $70.26 a barrel by 0610 GMT. U.S. West Texas Intermediate crude for July was at $67.66 a barrel, up $1.34, or 2% from Friday’s close, with no settlement price for Monday due to a U.S. public holiday.
Brent earlier hit a session peak of $70.34, the highest intraday price since March 8.
“While there are concerns over tighter COVID-19 related restrictions across parts of Asia, the market appears to be more focused on the positive demand story from the U.S. and parts of Europe,” analysts from ING Economics said in a note on Tuesday.
Australia’s central bank left its cash rate at record lows on Tuesday and reiterated its lower-for-longer policy stance even as data showed the country’s economic output was above its pre-pandemic level and house prices were shooting through the roof.
The Reserve Bank of Australia (RBA) left its policy settings at 0.1% for a sixth straight meeting, awaiting inflation and wage pressures, in a decision that was widely expected by economists in a Reuters poll. [AU/INT]
The local dollar stumbled to $0.7740 from a one-week high of $0.7769 reached earlier in the day as the RBA wrongfooted some market participants who were expecting a hawkish tilt in the central bank’s statement, in line with its New Zealand counterpart. [nL3N2NJ0VA]
The Reserve Bank of New Zealand (RBNZ) last week hinted at the end to a pandemic-era, ultra-loose monetary policy, leading some to believe the RBA would venture on that path too.
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