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Forex - Dollar steady near 2-month highs, Aussie gains

Published 05/31/2016, 04:17 AM
Updated 05/31/2016, 04:17 AM
© Reuters.  U.S. dollar near 2-month highs on rate hike bets

© Reuters. U.S. dollar near 2-month highs on rate hike bets

Investing.com - The U.S. dollar was steady close to two-month highs against the other major currencies on Tuesday, supported by expectations for a near-term rate hike, while the Australian dollar strengthened in the wake of upbeat domestic economic data.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 95.78, just below Monday’s highs of 95.96, the most since March 29.

Demand for the dollar continued to be underpinned after U.S. central bank chief Janet Yellen said Friday it would be appropriate for the Federal Reserve to raise rates “gradually and cautiously” in the coming months if the economy and the labor market continue to pick up as expected.

The Fed hiked interest rates in December for the first time in almost a decade.

Higher rates are positive for the dollar because they make the U.S. currency more attractive to yield-seeking investors.

Investors were turning their attention to Friday’s U.S. nonfarm payrolls report for May for fresh indications on the strength of the labor market.

The dollar eased against the yen, with USD/JPY sliding 0.17% to 110.93, backing off Monday’s three-week highs of 111.44.

The yen found support after data overnight showing that Japanese factory output unexpectedly rose in April despite a series of earthquakes in the south of the country.

The data tempered expectations that the Bank of Japan could ramp up its monetary easing as soon as next month after Prime Minister Shinzo Abe on Monday announced plans to delay a scheduled sales tax increase.

The euro edged lower ahead of euro zone inflation data for April later in the day, which is expected to show that consumer prices remained in negative territory last month.

The euro zone is also to release the latest jobs report.

EUR/USD eased 0.11% to 1.1127, re-approaching Monday’s 10-week lows of 1.1097.

The single currency was also weaker against the yen, with EUR/JPY down 0.27% at 123.44.

The Australian dollar strengthened, with AUD/USD hitting highs of 0.7250 after data showing strong increases in net exports and building approvals.

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