TOKYO- The dollar nursed its wounds on Wednesday following big tumbles against the euro and sterling, but the yen remained mired near 34-year lows even as Japanese officials stepped up intervention warnings.
The dollar’s broad overnight losses were driven by a combination of surprisingly robust European activity data and cooling US business growth.
The Australian dollar made the most of a weakened greenback as it rallied on the back of hotter-than-expected local consumer price data, leading markets to abandon hopes for any rate cuts from the Reserve Bank of Australia in the near-term.
The Aussie climbed 0.45 percent to $0.65185, after pushing as high as $0.6530 for the first time since April 12. The currency had already rebounded more than 1 percent over the past two days following its dip to a five-month low on Friday.
“This overshoot likely removes any chance of RBA cuts this year,” said James Kniveton, senior corporate FX dealer at Convera.
“The Australian dollar has benefited from a re-evaluation of the RBA’s monetary policy path, but geopolitical risks remain.”
The US dollar index which measures the currency against six major peers including the euro, sterling and yen – was last flat at 105.67 after earlier touching the lowest since April 12 at 105.59. It slumped 0.4 percent overnight.
The euro was little changed at $1.0705 following Tuesday’s 0.45 percent rally, after data showed business activity in the euro zone expanded at its fastest pace in nearly a year, primarily due to a recovery in services.
Sterling also benefited from overnight data showing British businesses recorded their fastest growth in activity in nearly a year, while Bank of England Chief Economist Huw Pill said interest rate cuts remained some way off. Sterling was last up 0.06 percent at $1.2455, having jumped 0.79 percent in the previous session.
