Dollar falls, Aussie gains on improving risk sentiment

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The dollar fell on Tuesday and risky currencies including the Australian dollar rose as US equities were stable, reflecting improved risk appetite.

The greenback has been a benefit to the recent volatility in equities, which last week arose from a dramatic jump in US government interest rates.

Government bonds have stabilized this week, with benchmark interest rates staying below last week’s peaks, which has helped restore some market volatility.

On Tuesday, “Wall Street largely retained Monday’s strong gains,” which helped the U.S. currency “decline during the NY session,” Ronald Simpson, CEO, Global Currency Analysis at Action Economics, said in a report.

The dollar index fell 0.31% to 90,731, after reaching a three-week high of 91,396.

The euro gained 0.36% to $ 1.2092.

Rising returns came when participants were worried that an economic recovery from the effects of the COVID-19 pandemic, combined with fiscal stimulus, would cause a spike in inflation and potentially faster austerity from the Federal Reserve.

Volatility also increased the greenback as investors wound up short positions in the currency.

“If you see volatility, the natural slope is to take the risk off the table. In this case, it basically means getting out of existing positions, and the dollar shorts are extremely elevated at this point,” said Bipan Rai, head of North America’s FX strategy. at CIBC Capital Markets in Toronto.

Short-term US dollar positions were $ 29.33 billion during the week ending February 23, according to the Commodity Futures Trading Commission.

Risky currencies, including the Australian dollar, continued to recover from last week’s sales, and the Aussie also got after the Reserve Bank of Australia committed to keeping interest rates historic.

The currency last rose 0.77% to $ 0.7831, although it is still below the three-year high of $ 0.88007 reached on Thursday.

Karen Jones, a technical analyst at Commerzbank, said that the Aussie and other risky currencies, including the Norwegian krone, seemed to be turning from intermediate peaks, which is likely to be positive for the US dollar in the short term.

“The US dollar is probably over” at present, Jones said in a report.

The greenback recently dropped 1.09% to SEK 8,466, but stays above the SEK 8,313 per dollar reached last week, the weakest for the dollar in more than two years.

However, safe-haven currencies, including the Swiss franc and the Japanese yen, ended slightly stronger, twisting previous weaknesses.

The Swiss franc previously reached its lowest level since November 2020 against the dollar at 0.9193, while the yen was the weakest since August at 106.95.

Bitcoin fell to a session low after Gary Gensler, President Joe Biden’s candidate for chairman of the US Securities and Exchange Commission, said that cryptocurrency has raised new problems for investor protection.

It recently lowered 4.11% to $ 47,609.
Citi said in a report that the popular cryptocurrency was at a “tipping point” and could become the preferred currency for international trade or face a “speculative implosion.”