NEW YORK: The US dollar recovered lost ground on Tuesday as trading desks returned to full strength and underlying trends for its continued rise reappeared, although it remains hemmed in to tight ranges by mixed economic data.
A surprising move by the Reserve Bank of Australia not to cut interest rates boosted the Aussie dollar, bucking the prevailing greenback rally.
That rally has stalled in the last month with disappointing U.S. economic data such as last week's weak jobs report underscoring a weak first quarter. Still, expectations for a recovery are putting a floor under the dollar.
"The bigger, broader pieces are that the U.S. economy should still outperform and the Fed is likely to raise interest rates sooner than everyone else. The dollar strength story is still intact, we're just in a pause because the dollar lacks a catalyst to push it to new highs," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.
The dollar recovered the ground it lost from Friday's dismal March employment report against the euro. The euro lost 0.54 percent to $1.08630 on the EBS trading platform..
The Aussie dollar rose to US$0.7711, its highest in a week, from around US$0.76 before the RBA decision, extending its recovery from a six-year trough of $0.7534 set on Thursday. It was last trading at $0.7651, up 0.83 percent on the day.
The RBA policy board noted that while the Aussie had fallen against a strong greenback, the decline against a basket of currencies had been less and a lower exchange rate was needed to help the economy.
"Should the Aussie appreciate notably today or over the next few days we would have to come to the conclusion that the market has misunderstood the RBA's intention (in refraining from cutting)," said Ulrich Leuchtmann, currency strategist at Commerzbank. "In that case this would offer entry levels for shorts in the Australian dollar in the medium term."
The dollar rose to a one-week high session high 120.3645 yen , up 0.70 percent.
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