The dollar slid on Tuesday, as U.S. Treasury yields paused in a relentless climb higher, providing brief relief to share markets and helping the euro in particular move further off multi-year lows.
The Australian dollar was also in focus, sinking after the nation's central bank surprised markets with a smaller-than-expected interest rate hike.
The euro EURUSD was last up 0.67% at $0.9889, a moderate recovery from its 20-year low of $0.9528 on Sept. 26, while sterling GBPUSD was up a touch at $1.1337, off a record low of $1.0327 also hit Sept. 26.
"The pullback by the U.S dollar has coincided with a sharp correction lower for U.S. yields," MUFG analysts said in a note to clients, adding that the two moves had "brought some much-needed relief for risk assets and high-beta currencies."
MUFG flagged the New Zealand dollar NZDUSD up 2.6% since the start of the week and Norwegian crown USDNOK, up 3% this week, as particular beneficiaries.
The dollar index DXY was down 0.55% at 111.12 having traded as high as 114.78 last week.
"Market expectations for the Fed’s terminal policy rate for next year have come down from around 4.75% to 4.39%," they added.
The benchmark 10-year Treasury yield (US10YT=RR) was last 3.5815%, down sharply from last week when it briefly poked above 4%.
The relentless climb in U.S. yields, as the Federal Reserve raises rates aggressively, has been one factor behind the dollar's recent gains.
Shares in Asia and Europe also rose on Tuesday in line with the improved sentiment, following overnight gains in the United States
Elsewhere the dollar was little changed against the Japanese yen at 144.7 yen USDJPY, keeping below 145 after briefly popping above that level on Monday for the first time since Japanese authorities intervened to support their currency on Sept. 22.
"Obviously the RBA hasn't been persuaded by what other central banks are doing, which does make the comment that they don't have any concerns about the exchange rate down here," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.
"There's no evidence yet that other central banks are about to step down the aggression with which they are tightening policy, (so) I think it makes sense for Aussie to be below 65 for the time being."
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