Aussie, Kiwi up on central bank talk; US dollar subdued

London

THE New Zealand and Australian dollar were the biggest gainers among major currencies on Tuesday, helped by talk from their central banks, while the US dollar took a back seat to the yen and Swiss franc amid some risk aversion in markets.

The Kiwi dollar rose 0.6 per cent to US$0.7007 - the biggest gainer among G-10 currencies on the day - after New Zealand's central bank said on Tuesday that it would soon begin consulting on ways to tighten mortgage lending standards, as it tries to control an inflated housing market and protect home buyers.

The Australian dollar spiked higher after the Reserve Bank of Australia stuck with its plan to taper its bond buying programme, shrugging off concerns about the economic impact from rising coronavirus cases. It gained half a per cent to US$0.7393 against its US counterpart.

The US dollar slipped 0.14 per cent to 109.16 yen, near its July 19 low of 109.07, which was its lowest level since late May. Against the Swiss franc, the dollar traded 0.3 per cent lower at 0.9026 franc, having hit a 11/2 month low of 0.9038 in the previous session.

The index that measures the dollar's strength against a basket of peers was down 0.1 per cent by 1053 GMT. Market watchers have of late pointed to the decline in US Treasury yields as being indicative of fears of a coming disappointment in economic growth.

The US 10-year Treasury yield dropped on Aug 2 shortly after an Institute for Supply Management (ISM) report showed July US manufacturing growth slowed for the second successive month.

The euro was a touch higher at US$1.1887, having lost some momentum after hitting a one-month high of US$1.1909 on July 30. Sterling gained 0.3 per cent to US$1.3931, just off July 30's one-month high of US$1.39835.

Clouding the outlook for the dollar further is the spread of the Covid-19 Delta variant. In the United States, Covid-19 hospital admissions in Louisiana and Florida have hit a new peak, though top US health expert Anthony Fauci has ruled out another lockdown in the country.

That outweighed any excitement over a US$1 trillion infrastructure investment bill that could be ready for a final vote as early as this week.

Japan expanded state-of-emergency curbs to more regions on Aug 2 as cases hit a record in Tokyo. In China, the spreading Delta variant poses new risks for the world's second-biggest economy. REUTERS