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After falling nearly 5% in January, world equities started
February slightly firmer and currency markets have also changed
course. After hitting a 19-month high last week, the U.S. dollar
index fell on Monday and on Tuesday was down 0.3% on the day at
96.395 at 0811 GMT.
The change follows slight caution from four U.S. Federal Reserve
policymakers about how many interest rate hikes will follow an
expected first one in March.
The dollar also fell against the Japanese yen, with the pair at
114.990.
The Australian dollar dropped sharply overnight after the
Reserve Bank of Australia (RBA) pushed back against expectations
for near-term rate hikes until inflation is higher.
But the "risk-on" tone in markets meant that the Australian
dollar soon recovered and was up 0.3% on the day at $0.70895 in
early European trading.
"Those market participants who were expecting a first rate hike
at the beginning of Q2 might have been disappointed," You-Na
Park-Heger, Commerzbank FX and EM analyst, said in a note to
clients.
"However, a first rate step is only fully priced in for the
middle of the year and that seems quite possible following the
RBA's comments today. That makes today's RBA decision neutral to
slightly negative for AUD."
Britain's pound was up 0.2% at $1.34765. Prime Minister Boris
Johnson faced renewed calls to resign after a report into
gatherings at his offices and residence during lockdown found
"serious failures of leadership".
British house price growth accelerated in January, marking the
strongest start to any year since 2005, mortgage lender
Nationwide said.
The euro was 0.2% higher on the day at$1.2585.
Investors are also betting on European Central Bank rate hikes
this year, despite its ultra-loose monetary policy stance.
German inflation data on Monday was well above expectations,
with consumer prices rising 5.1% year-on-year in January,
compared to 5.7% in December.
Euro zone inflation data is due on Wednesday.
"If the euro zone inflation data also surprises on the upside
tomorrow the market might bet on a more hawkish ECB. That means
EUR might find further support in the run-up to the meeting on
Thursday," Commerzbank's Park-Heger said.
Business confidence surveys are set for release through Tuesday
morning. Spanish factory activity grew in January for a twelfth
consecutive month, despite persistent troubles with supply
chains and price pressures.
Japan's manufacturing activity grew at the fastest pace in
nearly eight years.
The Russian rouble recovered to its strongest since Jan. 24
versus the dollar. It sank to a 15-month low last week, battered
by tensions between Moscow and the West over Ukraine.
In cryptocurrencies, bitcoin was up 0.2% to around $38,576,
still far below November's all-time high of $69,000..
India's finance minister said that the central bank will
introduce a digital currency in the next financial year, using
blockchain technology.
(Reporting by Elizabeth Howcroft; Editing by Alexander Smith)
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