Jitters about global growth caused the dollar to rise on Tuesday, sending the euro to its lowest in nearly three months and the Aussie down over 1%, not helped by underwhelming data in China and the Reserve Bank of Australia keeping rates steady.
The euro EUR=EBS was down 0.45% at 1.0747, while sterling GBP=D3 fell 0.6% to $1.2555, with both their lowest levels since mid June after poor activity data in China and Europe drove a risk off tone across asset classes.
China's Caixin services PMI was at levels last seen when swathes of the country were under lockdown, the latest in a series of weak data points from the world's second largest economy, while data showed euro zone business activity decline faster than initially thought last month.
"The twin drivers of dollar strength of U.S. higher yields and weaker growth conditions out of the U.S. are still in fifth gear," said Simon Harvey head of FX analysis at Monex Europe.
U.S. treasuries fell on resuming trading after a holiday with the U.S. 10 year yield up 4.5 basis points at 4.2163%. US10YT=RR
The China-exposed Australian dollar AUD=D3 was the most affected, falling 1.46% to $0.6372 hurt too by the RBA's latest policy update.
The central bank left its benchmark cash rate on hold at 4.1% for a third month in a row, and although it left the door open to future increases, markets are pricing only about a 30% chance that rates go higher from here.
0#RBAWATCH "The RBA's policy stance overall remains a weight on the Aussie, especially against the U.S. dollar, where the Fed funds rate seems highly likely to remain 125+ basis points above the RBA cash rate deep into 2024," said Westpac analyst Sean Callow.
The dollar was strong across the board, climbing against China's currency, and was last up 0.47% at 7.3096 against the yuan traded offshore CNH=D3 and up nearly as much in onshore markets. CNY=CFXS
The greenback also rose 0.56% against the Canadian dollar to $1.3669, its highest since late March, and up 0.85% against the Swedish crown at 11.10, its highest since November 2022. CAD=D3 SEK=D3
The yen JPY=EBS was at around a one-week low and analysts see it grinding toward 150 per dollar unless there is a sharp change in the gap between Japanese yields, pegged near zero, and U.S. yields comfortably above 4%. A dollar last bought 146.95 yen.
A Japanese government bond auction on Tuesday was uneventful, leaving 10-year Japanese yields JP10YTN=JBTC at 0.65%.
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