The U.S. dollar traded close to the bottom of its recent range versus major peers on Tuesday. The currency was knocked back by weak U.S. factory data and on market bets of swifter normalization of monetary policy in other countries.
The U.S. dollar index, which tracks the dollar against six majors, declined by 0.05% to close at 93.894 from Monday. Notably, it fluctuated for the past three weeks between 93.671 and the one-year peak of 94.563, which was hit last Tuesday.
However, over the past week, it has trended lower. It had a tapering of Fed stimulus next month already priced in, along with a first interest-rate hike next year.
A rebound in risk sentiment has reduced safe-haven U.S. dollar.
Moreover, Bank of England Governor Andrew Bailey sent a signal for early U.K. rate hikes by saying on Sunday that the central bank will have to act soon to counter increasing inflation risks. In New Zealand, data showed the fastest consumer-price inflation in more than a decade.
Britain and New Zealand led an increase in short-term bond yields around the world. Notably, rates in Europe and Australia soared comparatively more than those in the U.S., pressuring the greenback.
Westpac is bullish on the New Zealand dollar targeting a rise to $0.74 by year-end, and recommends buying any dips to $0.6985.
The New Zealand dollar advanced 0.11% to $0.7093, edging back toward a one-month peak of $0.7105 hit on Monday.
The Australian dollar surged 0.09% to $0.74225. Nearing a more than one-month peak of $0.7440 hit at the end of last week. Remarkably, minutes of the Reserve Bank of Australia’s September meeting revealed on Tuesday that policymakers are worried tighter policy could hurt the labor market.
The British pound gained 0.13% to settle at $1.37455, nearing Friday’s one-month high at $1.3773.
The euro increased by 0.09% to close at $1.16205, nearing the top of this month’s trading range.
The U.S. dollar against the safe-haven Japanese yen was slightly changed at 114.275. It was traded close to an almost three-year peak of 114.47 hit on Friday.
Moreover, U.S. manufacturing output was hardly hit as a continuing global shortage of semiconductors hurt motor vehicle output. Furthermore, it provided further sign that supply constraints were hampering economic growth.
According to Commonwealth Bank of Australia strategist Joseph Capurso, the spike in global inflation and interest rates may support the dollar.
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