Major currencies inch lower as traders cash in gains

London

MOST G-10 currencies fell on Tuesday as investors took profits from the risk-on mood seen in the markets in the past weeks and the US dollar found some footing, rising against commodity currencies for the first time in June.

The latest cause for exuberance, which drove stock markets higher, was last week's US jobs data for May. However, a stronger Japanese yen pointed to trepidation over the US Federal Reserve's two-day meeting starting later in the day.

"All the things that have done exceptionally well since March 23 when the Fed made all financial markets rise again are in reversal today, and the one currency that has gone down against the dollar since then was the yen," and now the yen is reversing, said Kit Juckes, macro strategist at Societe Generale.

"We've had two and a half months of rocking risk-on that's taken equities market further than anybody would have expected and we're having a big coordinated joined-up pause ahead of the Fed meeting," Mr Juckes said.

The Australian dollar fell nearly 2 per cent on Tuesday after China's education ministry on Tuesday urged students going overseas to think carefully before choosing Australia, citing racist incidents targeting Asians during the Covid-19 pandemic and putting A$12 billion (S$11.6 billion) of fee revenue at risk.

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"What surprised me is how the Australian dollar ignored up until now the deterioration of the relationship between Beijing and Australia," said Jane Foley, senior currency strategist at Rabobank. "There's been quite a few comments from China to Australia over the last few, and yet the Australian dollar managed to push up to 70."

"I suspect that one of the reasons that it fell back today was, yes it was the comments, but I think the market was sensing that the Australian dollar was also quite overbought around those levels."

The Australian dollar was last down 1.2 per cent to 0.6930 after falling nearly 2 per cent to 0.6899 - a five-day low. Earlier in the Asian trading session, it rose to an 11-month high of 0.7043. The New Zealand dollar fell 1 per cent to 0.6494, off the four-and-a-half-month high touched earlier.

The Japanese yen rose to a one-week high of 107.78 and was last trading up 0.3 per cent.

The euro fell 0.2 per cent to US$1.1277. REUTERS