US dollar at 3-week lows as traders await tapering clues

London

THE US dollar was trading near three-week lows against a basket of currencies on Tuesday, as investors looked to US jobs figures later this week for clues on stimulus taper timing.

The greenback has been on the back foot since Federal Reserve chair Jerome Powell's comments at the Jackson Hole conference on Aug 27 that the US central bank could scale back its bond buying programme this year, although he did not give a firm timeline.

US payrolls numbers due on Friday this week will be closely watched, analysts said.

"(Mr) Powell made clear on Friday that the Fed believes the 'substantial further progress' criteria has been met for inflation but not for employment and hence the jobs data will continue to be key for policy expectations," analysts at MUFG said in a note.

Trade on Tuesday will also likely be driven by month-end flows from businesses for their import and export transactions, traders said.

The dollar index slipped a quarter of a per cent to 92.456, its lowest level since Aug 6.

The euro gained 0.4 per cent against the broadly weaker dollar, hitting a three-week high of US$1.18370.

It was little changed after official data showed euro zone inflation surged to a 10-year-high this month, with consumer prices in the 19 countries sharing the euro up by 3 per cent.

Sterling strengthened to a two-week high of US$1.38010, before slipping back below US$1.38.

The yen was broadly flat at 109.945 to the dollar.

The New Zealand dollar strengthened nearly 1 per cent to US$0.70685, a day after the country's prime minister, Jacinda Ardern, partially eased lockdown restrictions outside of Auckland.

The offshore Chinese yuan slipped versus the dollar, but was largely steady after soft factory and service sector surveys.

"The drop in the non-manufacturing PMI (purchasing managers' index) reflects the impact of the coronavirus. But the infections in China have already peaked and dwindled," said Ei Kaku, senior strategist at Nomura Securities.

In cryptocurrencies, Bitcoin gained 0.8 per cent to US$47,369, recouping some of the previous day's losses. REUTERS