LONDON – The euro fell on Tuesday after several European Central Bank policymakers expressed doubt about a projected growth recovery in the second half of the year.
The concerns about the euro zone’s economy come five weeks after the ECB pushed out the timing of its first post-crisis rate hike until 2020.
The single currency fell 0.2 percent to $1.128 after sources told Reuters that ECB policymakers think the bank’s economic projections are too optimistic as growth weakness in China and trade tensions linger.
Major currencies traded within narrow ranges.
Traders are waiting for Chinese gross domestic product data on Wednesday, which may indicate the worst is over for the global economy.
Chinese exports and credit data last week signaled some stabilization in economic conditions.
Market volatility has eased to multi-year lows in recent weeks, though optimism over U.S.-China trade talks and strong Chinese economic data seem to be pushing investors out of safe havens and into riskier currencies, seeking higher yields.
The Australian dollar was the surprise loser after Australia’s central bank left the door ajar for a possible interest rate cut.
The Reserve Bank of Australia believes cutting interest rates would be “appropriate” if inflation stays low and unemployment rises, the central bank’s April board meeting minutes showed.
“That fuels expectations that not only will the next move be a cut, but that it will come this year,” Societe Generale analyst Kit Juckes said.
The Australian dollar lost 0.4 percent to $0.7144 after the release of the minutes, coming off Friday’s near seven-week high.
The Japanese yen remained close to 2019 lows against the U.S. and Australian dollars.
The dollar held steady against a basket of other major currencies on Tuesday, with investors cautious as they looked for signs of stabilization in the global economy.
The dollar index traded flat on the day at 96.950 after ending the previous session little changed.
“The higher-yielding dollar, with its interest rate differential versus the average of G10 foreign exchange being close to a two-decade high, continues to retain support,” analysts at ING said in a note to clients.
“For low-yielding major currencies it is difficult to go against the dollar’s meaningful interest rate differential at this point,” said the note. – Reuters