Investing.com – The U.S. dollar was steady in Europe on Tuesday, while the yen rose in the wake of suspected government intervention last week.
At 05:40 ET (09:40 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 104.067, rebounding from a four-month low hit last week.
The dollar takes a break
The dollar was steady on Tuesday, as traders appeared to take a breather as they digested the volatile political situation with little economic data until U.S. personal consumption spending inflation figures for June on Friday.
Vice President Kamala Harris appears to be on track to become the Democratic Party’s nominee for president, but she will still need a formal nomination.
However, Republican nominee Donald Trump is projected to be leading Biden and Harris in polls as of last week, according to CBS and HarrisX data.
Expectations of a Trump presidency have led to some strength in the dollar, with analysts saying he is likely to enact protectionist trade policies.
Key economic data is due out this week on Friday, with the June index set to test market expectations that the Federal Reserve is almost certain to cut interest rates in September.
Euro falls ahead of key activity data
In Europe, the US dollar fell 0.2% to 1.0873, retreating ahead of key activity data later in the week.
While economic growth in the eurozone remains sluggish, strength in the dominant services sector, supported by tourism, has kept price pressures uncomfortably high.
This has posed a challenge for the European Central Bank, so data on Wednesday will be closely watched after the bank left interest rates unchanged at 3.75% last Thursday, and declined to provide future guidance, saying it was “data dependent”.
Markets are pricing in the European Central Bank cutting interest rates about twice more during the rest of the year.
The pound was down 0.1% against the US dollar at 1.2919, retreating from the 1.30 level the pair hit last week for the first time in a year.
The pound has been boosted by the political stability brought about by Labour’s big election win earlier this month.
However, at the heart of this recent rise in sterling lies the belief that UK interest rates will take longer to fall than elsewhere.
Several major central banks have begun cutting interest rates, with the US Federal Reserve among the last to remain in place.
Data released earlier this month showed that interest rates remain stubbornly high, pushing the likely start date of the Bank of England’s rate-cutting cycle from August to later in the year.
Yen rises ahead of BOJ meeting
In Asia, the yen fell 0.7 percent to 155.94, not far from Thursday’s five-week low of 155.375, as the yen continued to rise against the dollar after suspected government intervention last week.
A senior Japanese government official has called for more clarity on whether the Bank of Japan will raise interest rates, the Financial Times reported on Tuesday. The comments come just a week before a monetary policy meeting that some analysts expect the bank to raise rates by 10 basis points.
The dollar rose to 7.2743, remaining close to levels last seen in November.
The currency has been hit hard by growing uncertainty over the Chinese economy, especially after recent data showed it grew less than expected in the second quarter.