However, the yen surged 0.6% higher for a second day of strong gains as Bank of Japan officials stated they are closely monitoring the currency and according to a report, the BOJ may soon talk about cutting back on bond purchases.
Tuesday saw the euro rise as high as $1.0916 for the first time since March 21 during the Asian trading session, but it ended the day down 0.4% at $1.0863. On Monday, it increased by 0.5% while the dollar declined.
The dollar index was up 0.27% at 104.32 as the US currency stabilized after dropping to its lowest level since mid-April overnight at 103.99.
The dollar index dropped by roughly 0.6% on Monday after data revealed an unexpected drop in construction spending and a second consecutive month of slower manufacturing output.
According to Chris Turner, global head of markets at lender ING, “today’s US JOLTS job openings data could determine whether recent dollar losses are… the start of an important new trend.”
Due out at 1400 GMT, or 10 a.m. ET, the US Job Openings and Labor Turnover Survey (JOLTS) will reveal how many positions are open in May. Additionally, the number of people who voluntarily leave their jobs will be reported.
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Tuesday saw the Japanese yen defy expectations and keep rising vs the US dollar, which had been declining on Monday. The US dollar was down 0.6% at 155.105, nearly its lowest level in the previous two weeks.
In determining monetary policy, the Bank of Japan’s deputy governor, Ryozo Himino, stated on Tuesday that the institution must be “extremely vigilant” about the potential effects of the yen’s volatility on inflation.
According to Bloomberg, the BOJ will talk about reducing its bond purchases when it meets for two days next week to review policy. This may cause rates to rise in the upcoming weeks and could precede an interest rate hike in July, which TD Securities analysts said they currently anticipate on Tuesday.
“We are inclined to see these stories as a test of the market’s reaction rather than anything more concrete, not least given the BOJ’s revealed preference for slow… adjustment,” said Nicholas Rees, FX market analyst at Monex Europe.
Sterling hit its highest since mid-March too at $1.2818 before falling to sit 0.43% lower.
Back in Europe, the dollar fell 0.2% to its lowest against the Swiss franc since mid-March at 0.8938 francs. Data showed Swiss inflation held steady at 1.4% year-on-year in May.
On Tuesday, a number of currencies that have been essential to carry trades—in which investors borrow money from nations with low interest rates and purchase bonds from those with high rates—saw significant fluctuations.
Due to market reactions to Claudia Sheinbaum’s overwhelming victory in Sunday’s presidential election, the high-yielding Mexican peso kept declining. The high-yielding pound fell as the low-yielding currencies, the Swiss and Japanese, rose.
A decline in oil prices due to investor concerns about supplies increasing later in the year despite indications of slowing U.S. demand also had an effect on currency markets.