The Dollar falls while the Aussie recovers

The dollar fell again, while the British pound and Aussie gained and recovered from an overnight drop.

On Tuesday, the U.S. dollar fell while risk-sensitive currencies such as the Australian dollar recovered and the British pound rose.

The Australian dollar recovered against its U.S. counterpart after the greenback dropped to its lowest level in almost two months, as investors sought haven assets following Thursday’s surprise rate hike by the Federal Reserve. The Fed increased interest rates by a quarter percentage point, its most significant move in years, to a range of 2.0% to 2.25%. The Australian dollar was down 0.6% against the greenback at $0.7277 at midday.

After falling nearly 5.1% in January, world equities started February slightly firmer, and currency markets changed course. After hitting an 18-month high last week, the U.S. dollar index fell, on Tuesday was down 0.4% on the day at 96.396.

The change follows a slight warning from four U.S. Federal Reserve policymakers. It was about how many interest rate hikes will happen in March.

The dollar also dropped against the Japanese yen, with the pair at 114.991.

Overview of the Aussie dollar

The Australian dollar fell sharply overnight after the Reserve Bank of Australia pushed back against anticipations for near-term rate hikes.

At the same time, the risk-on tone in markets suggested that the Australian dollar recovered. It was up 0.4% on the day at $0.70896 in early European trading.

Commerzbank FX and EM analyst You-Na Park-Heger talked about the market in a note to clients. He said that those market participants expecting the first-rate hike might have been disappointed.

Britain’s pound was up 0.3% at $1.34766. Prime Minister faced renewed calls to resign at his offices and residence during the lockdown.

In January, British house price growth accelerated.

The euro was 0.3% higher on the day at $1.2586.

This year, investors are also betting on European Central Bank rate hikes.

On Monday, German inflation data was well above expectations. Consumer prices rose 5.2% year-on-year in January, compared to 5.8% in December.

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