NEW YORK: The Aussie bounced back on Tuesday as sentiment improved on hopes that China would reopen from COVID shutdowns that have increased fears about global growth, while the US dollar dipped slightly against the euro and yen.

China will speed up COVID-19 vaccinations for elderly people, health officials said on Tuesday, aiming to overcome a key stumbling block in efforts to ease unpopular “zero-COVID” curbs.

“The reopening theme is coming back in China, so that’s supporting local equity markets and risk assets more broadly,” said Vassili Serebriakov, FX strategist at UBS in New York.

Risk appetite had worsened on Monday after protestors and police clashed over the stringent COVID restrictions.

Chinese authorities have begun inquiries into some of the people who gathered at weekend protests as police remained out in numbers on the city’s streets.

The risk sensitive Aussie dollar, which is strongly tied to Chinese growth, was the best performing major currency, rising 0.93% to $0.6715.

Federal Reserve interest rate policy is also in focus with Fed Chair Jerome Powell due to speak on Wednesday and jobs data for November due on Friday.

The dollar index has fallen to 106.65 from a 20-year high of 114.78 on Sept. 28 as investors look toward the US central bank reaching a peak rate early next year with inflation pressures expected to subside.

“The broader picture here has been we had a sizable reversal in the dollar since the October CPI report, so that’s probably a symptom of Fed tightening fading as a force of dollar support as markets increasingly look for peak Fed policy early next year,” said Serebriakov.

The US central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14. Traders are pricing for the fed funds rate to peak at 4.99% in June, before falling back to 4.61% by Dec. 2023.

Euro zone inflation data due on Wednesday is also in focus after data showed inflation in Spain and Germany came in below expectations.

European Central Bank President Christine Lagarde said on Monday that euro zone inflation had not peaked and it risked turning out even higher than currently expected, hinting at a series of interest rate hikes ahead.

The euro rose 0.04% against the US currency to $1.0344. The greenback dipped 0.13% to 138.72 Japanese yen.