Investing.com – The US dollar rose on Tuesday, reversing some of its recent losses as some calm returned to currency markets.
At 06:20 ET (10:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.4% higher at 102.907 after falling to a seven-month low on Monday .
The dollar is recovering after heavy losses
The dollar has been hit hard recently by fears of a US recession following a series of weak labor market data, raising expectations that the Federal Reserve will have to cut interest rates more than initially expected.
Traders are now expecting a 110 basis point easing this year from the Fed, pricing in an 80% chance 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 pushed back against the idea that weaker-than-expected July employment data means the economy is in freefall from a recession, but also warned that the Federal Reserve will have to cut interest rates to avoid a recession. prevent such an outcome.
“Jobs numbers are weaker than expected, but not yet indicative of a recession,” the Chicago Federal Reserve president said. “I do think you want to look ahead to where the economy is going when making the decisions.”
The euro and sterling give back some gains
In Europe, the dollar gained ground against both the euro and sterling, with the European Central Bank and the Bank of England having already started cutting interest rates to stimulate their respective economies.
fell 0.4% to 1.0911, after hitting a seven-month high of 1.1009 on Monday, with data showing the eurozone fell 0.3% in June, suggesting consumers are under pressure stay.
On the other hand, growth in June rose more than forecast, by 3.9% from the previous month, offering a glimmer of hope for Europe’s largest economy.
fell 0.5% to 1.2706, giving up some of its recent gains as the dollar strengthened.
Interest rates were cut last week, lowering the benchmark rate by a quarter point to 5%.
The yen falls for the first time in August
In Asia, yields rose 0.2% to 144.47, with the yen weakening for the first day this month and consolidating after notable moves in recent days.
The yen had benefited from increased demand for safe havens as broader financial markets collapsed. Hawkish yield signals – which raised rates and signaled further rate hikes – also boosted the currency, as did an expiring 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 falling after comments from Governor Michele Bullock suggesting interest rate cuts were further away.
The Australian central bank kept interest rates steady on Tuesday as expected, but reiterated that it was not making any adjustments to keep inflation under control.
