Investing.com - The dollar rose to its highest level in six weeks against a basket of other major currencies on Tuesday, bolstered by strong gains against the euro ahead of U.S. inflation data due out later in the day.
EUR/USD was down 0.32% to 1.3480, the lowest since February 2.
The diverging monetary policy path between the European Central Bank and other central bank’s has weighed on the single currency since the ECB cut rates to record lows on June 5, in a bid to stave off the threat of deflation in the euro area.
In contrast, Federal Reserve Chair Janet Yellen indicated last week that interest rates may rise sooner if the economy continues to improve. Investors were looking ahead to U.S. data on consumer prices later in the day, for further indications on the strength of the recovery.
The dollar also gained ground against the yen and the traditional safe haven Swiss franc, with USD/JPY rising 0.14% to 101.53 and USD/CHF up 0.37% to 0.9012.
Market sentiment recovered on Tuesday, but investors continued to eye heightened tensions between the West and Russia following the downing of a Malaysian airliner in eastern Ukraine late last week, while Israel’s ground offensive in Gaza also remained in focus.
The pound edged lower, with GBP/USD slipping 0.08% to 1.7062.
Earlier Tuesday, official data showed that the U.K. public finances showed a bigger than expected deficit in June. The U.K. borrowed £11.38 billion last month, compared to expectations for a deficit of £10.66 billion. In the same month last year, the U.K. borrowed £7.59 billion.
The Australian dollar edged higher, with AUD/USD rising 0.17% to 0.9389 after Reserve Bank Governor Glenn Stevens said Tuesday he is content with current monetary policy and added that the bank is ready to do more if needed.
Elsewhere, NZD/USD was down 0.22% to 0.8670, while USD/CAD was little changed at 1.0743.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.23% to 80.80, the highest since June 18.