Dollar, yen slip

The low-yielding US dollar and yen faltered on Tuesday, weighed down by an improving global economic backdrop that spurred investors to seek higher returns in riskier commodity-related currencies. Solid demand at a Spanish bill auction and upbeat German investor sentiment gave investors a green light to leave the relative safety of the dollar and yen. That gave the euro support against the greenback.
The Canadian dollar was the best performing currency, jumping more than 1 percent after the Bank of Canada said it may need to start hiking rates due to firmer-than-expected growth and inflation. Sterling, the Australian dollar and New Zealand dollar also posted gains against the greenback, reflecting investors' increased appetite for risk.
"Risk sentiment is a little better today. We're seeing the dollar firm against the yen, while the riskier currencies such as the Aussie, Kiwi, and Canadian dollar are also higher," said Brian Kim, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut.
In mid afternoon New York the euro was 0.1 percent lower at $1.3131 after surpassing Monday's high to hit $1.3172. The session low posted at $1.3088.
The euro touched the session high after Spain's bill sales. Investors were relieved after Spain sold 3.2 billion euros of 12- and 18-month bills, although at much higher yields compared with a month ago. A far bigger test will come on Thursday, when Spain sells 10-year and 2-year bonds. The euro was up 0.6 percent at 106.20 yen, recovering from Monday's trough where it fell to a level not seen since mid-February.
The euro zone common currency, however, fell 0.3 percent against sterling and slid 0.2 percent against the Norwegian crown and 0.1 percent against the Swedish crown.
The Canadian dollar, meanwhile, posted steep gains against the US dollar, with the greenback falling 1 percent to C$0.9900 with the session low at C$0.9861, a one month low.
The dollar rose 0.6 percent against the safe-haven yen to 80.85 yen - above a seven-week low of 80.31 hit on Monday.
Traders said investors didn't want to get caught short the dollar versus the yen under 81 yen, citing talk this week of semi-official buying of the dollar below that figure. The higher-yielding Australian dollar edged up 0.5 percent at US $1.0398 on the positive global sentiment. It cut earlier losses after Reserve Bank of Australia policy meeting minutes showed it would consider cutting interest rates in May if data confirmed a benign inflation outlook.
The New Zealand dollar gained 0.2 percent to US $0.8215.