The dollar held firm early on Tuesday after crawling away from an 18-day low against the yen thanks to a bounce in U.S. yields, while the Australian dollar was steady ahead of a policy decision by the country’s central bank later in the day. The U.S. currency was little changed at 110.425 yen after slipping overnight to 110.250, its lowest since May 18. The dollar had came under pressure as Friday’s weaker-than-expected U.S. non-farm jobs report prompted investors to pare back expectations of future interest rate increases by the Federal Reserve.
U.S. Treasury yields fell sharply in response to the employment data but pulled higher a little on Monday to give the dollar some breathing space. Still, with the benchmark 10-year Treasury yield not far from a seven-month low plumbed on Friday, the dollar’s recovery was limited. “The broader decline in Treasury yields amid a less rosy outlook for the global economy is weighing on the dollar. But on the other hand, the upbeat equity markets is good for risk sentiment and this prevents the dollar from falling too much against the yen,” said Shin Kadota, a senior strategist at Barclays in Tokyo.
“Dollar/yen sees ample support at 110.00 but its range has also narrowed down due to such factors.” The euro was steady at $1.1255 after slipping about 0.3 percent the previous day to pull away from seven-month high scaled on the dollar’s broader decline. The common currency’s advance also stalled as a wait-and-see mood prevailed ahead of Thursday’s European Central Bank policy meeting.
The Australian dollar was little changed at $0.7487 . The Aussie had slumped to a three-week low of $0.7322 earlier last week on weak China data and lower commodity prices before rebounding against a flagging greenback. The market looked to the Reserve Bank of Australia’s policy decision due later on Tuesday for cues.
The RBA is widely expected to keep interest rates unchanged at a record low of 1.5 percent and focus was on its stance on the domestic economy in the wake the recent drop in iron ore prices, a relatively high unemployment rate and sluggish wage growth. Sterling treaded water at $1.2097 after rising overnight to a 10-day high of $1.2940 after an opinion poll gave Britain’s ruling Conservative Party a comfortable lead ahead of Thursday’s parliamentary elections.