Aussie dollar struggles after RBA caution, other currencies tread water

LONDON: Major currencies traded within narrow ranges on Tuesday, before European and Chinese data that may indicate the worst is over for the global economy.

The Australian dollar was the surprise loser after Australia's central bank left the door ajar for a possible cut in interest rates.

Market volatility has eased to multi-year lows in recent weeks. Moves have been limited, though optimism over U.S.-China trade talks and strong Chinese economic data seem to be pushing investors out of safe havens and into riskier currencies, seeking higher yields.

The yen remained close to 2019 lows against the U.S. and Australian dollars.

The dollar edged up against a basket of other major currencies on Tuesday, with investors cautious as they looked for signs of stabilisation in the global economy. The dollar index was last up 96.950 after ending the previous session little changed.

"The higher yielding dollar, with its interest rate differential vs the average of G10 foreign exchange being close to a two-decade high, continues to retain support," analysts at ING said in a note to client.

"For low-yielding major currencies it is difficult to go against the dollar's meaningful interest rate differential at this point," said the note.

The Reserve Bank of Australia believes cutting interest rates would be "appropriate" if inflation stays low and unemployment rises, the central bank's April board meeting minutes showed.

"That fuels expectations that not only will the next move be a cut, but that it will come this year,"  Societe Generale analyst Kit Juckes said.

The Australian dollar lost 0.4 percent to $0.7144 after the release of the minutes, coming off Friday's near seven-week high.

Markets are now focused on European and Chinese data for more evidence on the health of the global economy.

The data include Germany's ZEW economic index for April, due around 0900 GMT, and China's gross domestic product on Wednesday. Chinese exports and credit data last week signalled some stabilisation in economic conditions.

The euro was down at $1.1307, erasing the previous session's  gain.