The U.S. dollar was under pressure Tuesday, notably from the British pound, which climbed on a forecast for interest-rate increases by a member of the Bank of England’s monetary policy committee.
With the move, the dollar retraced some of the gains that had taken it to 2018 highs in recent trading sessions.
Check out: Being long the dollar is cool again
But also: Why it may be downhill from here for the U.S. dollar
How are currencies performing?
The ICE U.S. Dollar Index DXY, -0.13% which measures the dollar against six rivals, was 0.2% weaker at 93.524. The index gained 1.2% last week, its strongest gain since the period ending April 27, according to FactSet.
The WSJ Dollar Index BUXX, -0.02% a broader measure of the greenback that also includes emerging-markets currencies, was off 0.1% at 87.02.
The British pound GBPUSD, +0.0149% jumped to a session high of $1.3492 on Tuesday, retracing its losses from Monday when it hit its lowest level since late December. The pound last bought $1.3444, up from $1.3426 on Monday. Sterling was also stronger against the euro EURGBP, -0.0797% with the shared currency buying £0.8765, down 0.2%.
The euro EURUSD, -0.0594% rose was little changed in negative territory versus the dollar, fetching $1.1787.
Against the Japanese yen USDJPY, -0.01% the greenback traded at ¥110.93, down from ¥111.05 late Friday.
Canada’s dollar USDCAD, -0.0626% and Mexico’s peso USDMXN, -0.4102% both strengthened against the U.S. unit. One buck bought C$1.2761, down from C$1.2790, as well as 19.7320 pesos, compared with 19.8199 pesos late Monday.
See: Bank of Canada has to weigh oil prices and Nafta risk for summer rate hike timing
The Turkish lira USDTRY, +1.5782% stabilized after hitting a fresh record low against the dollar on Monday. The greenback bought 4.6320 lira, compared with 4.5749 late Monday.
Don’t miss: Turkish lira hits historic low as Erdogan eyes control of country’s central bank
What’s driving currency trade?
The U.S. dollar was off its steady strengthening path on Tuesday, as 10-year government bond yields TMUBMUSD10Y, +0.51% spent another day in relatively unchanged territory. The U.S. currency had taken clues from rising yields on Treasurys, which hit a seven-year intraday high of 3.126% on Friday. The 10-year yield was last at 3.049%.
Elsewhere, the British pound got a lifeline on Tuesday after Bank of England policy maker Gertjan Vlieghe reportedly told the U.K. Treasury Committee that interest rates are poised to rise 25 to 50 basis points every year over a three-year forecast period. This led the U.K. currency to strengthen as interest-rate increases in the central bank’s home country are seen as supportive for that currency.
See: ‘Greek-like crisis’ fears hang over Italy’s markets as populists ready government
What are strategists saying?
“It is not clear whether the recent weakness in the dollar marks a top in the rally of the past few months, but with the market still broadly short [dollar] it is easy to imagine that the greenback will perk up in due course, even if [Wednesday’s] Fed minutes aren’t overly hawkish,” said Chris Beauchamp, chief market analyst at IG, in a note to clients.
“After the reversal in yesterday’s North American trade where the euro-dollar bounced off the $1.17 level and closed at the day’s highs, the single currency pushed higher hitting a high of $1.1830 before retreating somewhat,” wrote Boris Schlossberg, managing director of FX Strategy. “The moves are driven by nothing more than short covering and profit-taking, but the pair is so oversold given its near 800 pip plunge over the past two months that a further bounce may be due.”
Read: The euro could rally to $1.30 within 12 months, says currency strategist
What else is in focus?
There is no economic data on the calendar for Tuesday, leaving investors to look ahead to the Wednesday release of the minutes from latest Federal Open Market Committee meeting.
In other assets, U.S. stocks including the Dow Jones Industrial Average DJIA, -0.05% opened higher, adding on from Monday’s gains.