By Peter Nurse
Investing.com - The dollar sold off in early European trade Tuesday, continuing its post nonfarm payrolls weakness, while both the Australian and New Zealand dollars strengthened amid signs that these economies are recovering strongly.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower at 92.028,.
USD/JPY was down 0.1% at 110.81, EUR/USD rose 0.3% to 1.1893, while GBP/USD rose 0.3% to 1.3893, benefiting from U.K. Prime Minister Boris Johnson announcing on Monday that all Covid restrictions are expected to be lifted in England in two weeks’ time.
The dollar has been dropping since Friday’s jobs report, as although the release was upbeat, in that 850,000 jobs were added in June, it wasn’t sufficiently strong to push the Federal Reserve into tapering its asset buying anytime soon.
U.S. interest rate markets slightly softened their stance on early Fed tightening as a result of the jobs data, and that tone is likely to continue until Wednesday’s release of the minutes of the Fed’s June meeting. This was the meeting where officials brought forward their expectations of when interest rates will be raised to 2023.
Elsewhere, AUD/USD rose 0.8% at 0.7590 after the Reserve Bank of Australia announced a pared-back extension of its quantitative easing program, while stating that it expects to keep interest rates at a record low until 2024.
“The bond purchase program is playing an important role in supporting the Australian economy,” Governor Philip Lowe said. “The bank will continue to purchase bonds given that we remain some distance from the inflation and employment objectives. However, the board is responding to the stronger-than-expected economic recovery and the improved outlook by adjusting the weekly amount purchased.”
Additionally, NZD/USD rose 1.1% to 0.7099 after a survey by the New Zealand Institute of Economic Research published Tuesday showed more companies expect an improved business climate, bringing forward expectations of the country’s first interest rate hike to the end of this year.
Elsewhere a sharp rise in oil prices after the group of top producers failed to come up with an agreement to increase output levels lent support to currencies linked to the price of crude, with USD/NOK down 0.4% at 8.5383 and USD/CAD down 0.3% at 1.2306.