Investing.com – The U.S. dollar rose on Tuesday, recouping some recent losses as some tranquil returned to currency markets.
The dollar index, which tracks the U.S. currency against a basket of six other currencies, was up 0.4% at 102.907 at 06:20 ET (10:20 GMT), after falling to a seven-month low on Monday.
The dollar is recovering after massive losses
Fears of a U.S. recession following a series of feeble labor market data have weakened the dollar recently, fueling concerns that the Federal Reserve will have to cut interest rates more than initially anticipated.
Traders are now expecting 110 basis points of Fed rate easing this year, pricing in an 80% probability of a 50 basis point cut in September after fully pricing in a 50 basis point cut on Monday.
U.S. central bank policymakers on Monday dismissed the view that weaker-than-expected July jobs data meant the economy was in recession and free fall, but they also warned that the Federal Reserve would have to cut interest rates to avoid such a scenario.
“The jobs numbers are weaker than expected, but they don’t look like a recession yet,” the president of the Chicago Federal Reserve said. “I think you have to look ahead to where the economy is going to go to make decisions.”
Euro and pound give back some of their gains
In Europe, the dollar appreciated against both the euro and sterling, while the European Central Bank and the Bank of England have already started cutting interest rates to stimulate their economies.
fell 0.4% to 1.0911, having hit a seven-month peak of 1.1009 on Monday. The data showed the euro zone fell 0.3% in June, suggesting consumers remain tense.
On the other hand, growth in June was stronger than forecast, at 3.9% compared to the previous month, giving a glimmer of hope to Europe’s largest economy.
fell 0.5% to 1.2706, giving back some recent gains as the dollar strengthened.
Interest rates were cut last week, reducing the reference rate by a quarter of a percentage point to 5%.
The yen falls for the first time in August
In Asia, the yen rose 0.2% to 144.47, weakening for the first time this month as it consolidated after keen swings in recent days.
The yen benefited from a surge in demand for safe-haven assets as broader financial markets slumped. Hawkish signals from the eurozone — which have raised interest rates and signaled more hikes — also boosted the currency, as did a retreating carry trade.
rose 0.3% to 7.1504, with the yuan weakening ahead of key trade and inflation data this week.
fell 0.2% to 0.648, with the Australian dollar weakening following comments from Governor Michele Bullock, who suggested that interest rate cuts were still a ways off.
As expected, Australia’s central bank kept interest rates unchanged on Tuesday, while stressing that it did not rule out any action to control inflation.
