Image: Reuters Berita 24 English - On Tuesday, the euro gave up some of its recent gains, but it was still on track to have its best month ...
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| Image: Reuters |
Berita 24 English - On Tuesday, the euro gave up some of its recent gains, but it was still on track to have its best month in a year as markets repositioned themselves in anticipation of interest rate hikes in Europe and the potential of a slower pace of rate hikes in the United States.
The euro was down 0.3 percent at $1.0745, after hitting a five-week high of $1.0786 overnight, as German inflation soared to its highest level in nearly half a century in May, owing to rising energy and food prices.
This supports the case for more aggressive rate hikes by the European Central Bank, which is scheduled to begin raising rates for the first time since the epidemic began in July.
The Eurozone CPI data is due later Tuesday, and CBA analysts believe the German data suggests it may also come in above forecasts.
"A number of ECB officials are speaking tonight," they added in a letter to clients, "no doubt pumping up the possibility of higher European interest rates."
In May, the euro is expected to rise by 2.2 percent, its highest monthly gain in a year.
The dollar index stood at 101.63, down from 101.29 overnight, which was a five-week low. The index compares the dollar to six other currencies, with the euro receiving the most weighting.
"The focus has changed from greater inflation and more rate hikes to concerns about whether Fed tightening is putting pressure on the economy," said Redmond Wong, market analyst at Saxo Markets Hong Kong.
He cautioned, however, that the Federal Reserve's move away from an aggressive pace of tightening was not inevitable, citing hawkish remarks by Fed governor Christopher Waller overnight as evidence, noting that "this trend of a weaker currency might reverse."
According to investors, the safe-haven greenback has recently been pushed down by a revival in attitude towards riskier assets and currencies, which is partially due to the relaxation of lockdowns in China's financial capital of Shanghai.
The news that European Union leaders had agreed in principle on Monday to limit most Russian oil imports by the end of the year pushed oil prices higher and commodity currencies higher.
The Canadian dollar climbed to 1.2653 per dollar, close to a one-month high. The Australian dollar has recovered from its low of $0.7163, aided by better-than-expected PMI data from China, and is currently trading at $0.7180.
Bitcoin was trading about $31,600, having surpassed $32,000 for the first time in over three weeks overnight.
Sterling was trading at $1.263, on track for its first monthly gain in 2022, with a 0.5 percent gain against the dollar.
The yen was trading at 128.15 per dollar, down on the day but on track for its best month since July of last year.
