The Dollar declined on Tuesday as U.S. Treasury yields’ move higher paused, offering a degree of relief to share markets, and helping the Pound and Euro to edge further away from multi-year lows.
Indeed, the single currency rose 0.5% to $0.9876 at the time of writing, up from its two-decade low of $0.9528 reached on 26th September. The Pound increased 0.6% to $1.1390, away from the all-time low of $1.0327 on Tuesday, Reuters reports.
“The pullback by the U.S Dollar has coincided with a sharp correction lower for U.S. yields,” according to MUFG analysts, going on to say that the moves had “brought some much-needed relief for risk assets and high-beta currencies.”
Particular beneficiaries of this, according to MUFG, are the New Zealand Dollar which has moved up 2.6% since the beginning of the week, and Norway’s Krone which has risen 3%.
They said the moves in the greenback and yields seems to highlight market participants' relief that the Federal Reserve is nearer to the end of its rate hike cycle. “Market expectations for the Fed’s terminal policy rate for next year have come down from around 4.75% to 4.39%,” they added.
In addition, there was little change for the Dollar against the Yen, at 144.7, remaining below 145 after briefly surpassing that level on Monday.
Japan’s finance minister, Shunichi Suzuki on Monday echoed that authorities are ready to take “decisive” steps in the foreign exchange market if “sharp and one-sided” Yen moves continued.
Elsewhere, the Australian Dollar rose 0.15% to $0.6525. This signalled a recovery from being down around 1% earlier on Tuesday, after the central bank hiked rates by a smaller-than-forecast 25 basis points.
“Obviously the RBA hasn't been persuaded by what other central banks are doing, which does make the comment that they don't have any concerns about the exchange rate down here,” stated head of FX strategy at National Australia Bank in Sydney, Ray Attrill.
“There's no evidence yet that other central banks are about to step down the aggression with which they are tightening policy, (so) I think it makes sense for Aussie to be below 65 for the time being.”