Investing.com - The dollar eased off a 16-month trough against the other major currencies on Tuesday, as the greenback began to finally recover from last week’s policy decisions by the Bank of Japan and the Federal Reserve, although gains were expected to remain limited.
USD/JPY was down 0.19% at 106.21, after hitting 18-month lows of 105.55 earlier in the day.
Safe-haven demand strengthened after data earlier showed that China’s Caixin manufacturing purchasing managers’ index ticked down to 49.4 in April from 49.7 the previous month, compared to expectations for a rise to 49.9.
The weak data added to concerns over slowdown in the world’s second largest economy.
The yen also remained broadly supported after the BoJ chose on last Thursday to hold its monetary policy, defying market expectations for additional monetary easing.
The decision came a day after the Fed kept interest rates on hold last week and indicated that any future interest rate hikes would be data dependent.
EUR/USD slipped 0.13% to 1.1519, after rising to nine-month highs of 1.1615 earlier.
The dollar pushed higher against the pound, with GBP/USD down 0.78% at 1.4560 and remained lower against the Swiss franc, with USD/CHF slipping 0.16% to 0.9530.
Sterling weakened after research group Markit said its U.K. manufacturing PMI fell to 49.2 last month from a reading of 51.0 in March. That was its lowest level since February 2013.
Analysts had expected the index to advance slightly to 51.2 in April.
The Australian and New Zealand dollars extended earlier losses, with AUD/USD down 2.06% at a one-month trough of 0.7511 and with NZD/USD tumbling 1.20% to 0.6937.
The Reserve Bank of Australia surprised markets on Tuesday by lowering its benchmark interest rate to 1.75% from 2.00%.
Commenting on the decision, RBA Governor Glenn Stevens said the rate cut was based on last week's surprisingly weak inflation reading.
Also Tuesday, the Australian Bureau of Statistics said that building approvals rose by 3.7% in March, confounding expectations for a 3.0% decline. Building approvals rose 2.9% in February, whose figure was revised from a previously estimated 3.1% gain.
Elsewhere, USD/CAD rallied 1.17% to 1.26749, easing off an 11-month low of 1.2461 hit earlier in the session as declining oil prices weighed on demand for the commodity-related loonie.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.22% at 92.73, off the session’s 16-month low of 91.89.