The dollar gained across the board on Tuesday, lifted by safe-haven demand that was driven by worries about a potential slowdown in China, which hurt both European and US stocks. Global miner BHP Billiton said it saw signs that growth in iron-ore demand was flattening in China, Australia's single biggest export market. That pushed the Australian dollar down more than 1 percent.
In addition, China's National Development and Reform Commission raised domestic retail energy prices, effective Tuesday, the second time in less than two months. Even though that still leaves a wide gap between international and domestic prices, investors were concerned that higher energy costs could further undermine an already slowing Chinese economy.
"The dollar is gaining because of its safe-harbour appeal on worries about Chinese growth. The risk-off market that we're seeing has bolstered demand for the dollar as a safe haven," said Joe Manimbo, senior market analyst at Travelex Global Business Payments in Washington. In late afternoon trading, the dollar index, a gauge of its value against six major currencies, was up 0.2 percent at 79.613, rising for a second straight day.
The dollar has also benefited from positive US economic data, rising in recent days in sync with stocks and Treasury yields. Travelex's Manimbo said next week's round of US economic reports should boost the greenback should they turn out to be supportive of US growth expectations. The Aussie was one of the biggest casualties in the dollar's rally on Tuesday, further undermined by minutes from Australia's central bank deemed as dovish as they suggested that the bank has ample room to ease policy should conditions worsen.
Against the US dollar, the Australian dollar slid to US $1.0477, down 1.2 percent for the day, while the New Zealand dollar slumped 1.1 percent to US $0.8170. Key technical support for the Australian dollar lies at the 200-day simple moving average of $1.0401 while the 100-day SMA lies at $1.0370. Resistance is seen near $1.064.
The euro last traded at $1.32219, down 0.2 percent on the day, not far from a one-week high near $1.32659 hit on Monday, with support at the 100-day moving average around $1.32013. Moves in the dollar versus the yen picked up in European trade after a quiet Asian session when Japanese financial markets were closed for a national holiday.
The dollar rose 0.4 percent to 83.700 yen, moving back toward an 11-month high of 84.187 hit last Thursday on trading platform EBS, while the yen hit a fresh four-month low versus the euro of 110.824 yen. Currency volume dwindled in the afternoon session to around half the 30-day average, according to Forex Factory, a currency website.