The dollar advanced on Tuesday as last week's rally in riskier currencies took a breather, gaining on the euro after weak German data and on the Australian dollar after its central bank raised interest rates but hinted the hike was the cycle's last.
The dollar index which tracks the U.S. unit against six main peers was up 0.35% at 105.65, driven by a 0.37% fall in the euro to $1.0677 and a 0.4% drop in the pound to $1.2288.
Tuesday data showing a larger-than-expected fall in German industrial production in September contributed to the euro's weakness, said Fiona Cincotta, senior financial market analyst at City Index.
The euro, like most other currencies, gained sharply on the dollar last week as a series of data points - most notably U.S. data from Friday showing job growth slowed in October - sent the U.S. unit lower.
That led markets to price in Federal Reserve rate cuts by the middle of next year, contributing to a move lower in U.S. Treasury yields, and lifting risk appetite.
The dollar fell 1.4% last week, its steepest decline since mid-July, a sharp reversal after a recent run higher.
The focus was on Australia earlier in the day, where the Reserve Bank raised interest rates by 25 basis points to combat stubborn inflation, as expected, but markets seized on a tweak to the language in the central bank's statement, and concluded further tightening was unlikely.
The Australian dollar sank 1.2%% to $0.641, on course for its biggest one-day percentage decline in a month.
Commonwealth Bank of Australia (OTC:CMWAY)'s currency strategist Carol Kong said RBA's forward guidance was slightly watered down, which was perceived as dovish, resulting in the Aussie quickly giving back its gains after an initial knee-jerk rally.
The Aussie had been among the beneficiaries of last week's weakening dollar and touched a three-month peak on Monday.
The dollar gained 0.24% on the Japanese yen to 150.43 yen, back above the 150-level that has kept traders on edge in recent weeks as they look for signs of intervention from Tokyo.
The yen softened to 151.74 per dollar last week, edging closer to October 2022 lows that spurred several rounds of dollar-selling intervention.
Source : Reuters
