The Dollar recovered in trade thinned by a US market holiday on Monday, as investors locked in profits following the currency's worst weekly performance of the year so far. A series of weak US economic reports last Friday, including one showing consumer sentiment hitting a 16-year low, had renewed worries about a US recession and reinforced expectations for more interest rate cuts.
Yesterday, EurUsd edged down 0.22% to 1.4650 scaling back from a two-week peak 1.4709 set on Friday. UsdJpy was 0.33% firmer at 108.18.
US Dollar was weaker against higher-yielding currencies such as the Australian and New Zealand Dollar. AudUsd went up 0.78% to 0.9162, 3-month high, while NzdUsd was 0.77% higher at 0.7963. Australian Dollar is supported by a strong yield advantage and expectations that the Reserve Bank of Australia will raise rates from the current 11-year high of 7% as early as March. That was in sharp contrast to the Fed's deep cuts in benchmark rates since September to 3% from 5.25%, with investors eyeing another 50bp reduction at the March policy meeting.
Elsewhere, GbpUsd fell 0.54% to 1.9507 as news Britain had decided to nationalize bank Northern Rock added to worries about the health of the UK economy.
On Tuesday, the focus will likely be on RBA minutes, Canadian inflation data and, above all, on the mood in which US investors return to the market after a long weekend.