Dollar Advances Against Majors
In the Asian session on Tuesday, the U.S. dollar rose against other major currencies as risk appetite reduced on speculation of an interest rate hike by China.
The People's Bank of China on Monday said inflationary pressure still remains at a high level and vowed to maintain prudent monetary policy.
In the Monetary Policy Committee meeting, policy makers stressed the need for paying close attention to the current international and domestic economic and financial situation and also the importance of 'stability' in implementing prudent monetary policy.
The PBOC's statement increased speculation that an interest rate hike could be imminent.
Adding to worries, Moody's Investor Service warned today that the scale of problem loans at Chinese banks may be larger than estimated by the National Audit Office (NAO).
The Chinese audit agency could be understating banks' exposures to the local governments borrowers and the local government debt may be CNY 3.5 trillion higher than estimated, the rating agency said.
It also warned that the absence of a clear master plan to deal with this issue may potentially turn the outlook for the Chinese banking system to negative.
The dollar rose to a 4-day high of 81.13 against the yen. The next upside target level for the dollar is seen at 81.3. At yesterday's close, the dollar-yen pair was quoted at 80.80.
Against the euro, the dollar strengthened to a 4-day high of 1.4467, compared to yesterday's close of 1.4539. On the upside, 1.445 is seen as the next target level for the U.S. currency.
The dollar climbed to a 4-day high of 1.6032 against the pound and if the dollar advances further, it may likely target the 1.600 level. The pound-dollar pair closed yesterday's trading at 1.6089.
The US dollar edged up to a 6-day high of 1.0667 against the Australian dollar, compared to yesterday's close of 1.0736. On the upside, 1.055 is seen as the next target level for the greenback.
As expected, the Reserve Bank of Australia decided to maintain its cash rate unchanged at 4.75 percent.
At today's meeting, the Monetary Policy Board judged that the current "mildly restrictive" stance of monetary policy remained appropriate. In future meetings, the board will continue to assess carefully the evolving outlook for growth and inflation, the bank said in a statement.
Against the New Zealand dollar, the US dollar rose to a 4-day high of 0.8268. The next upside target level for the greenback is seen at 0.824. The kiwi-greenback pair was worth 0.8297 at yesterday's close.
The U.S. dollar is trading at a 4-day high of 0.9622 against the Canadian dollar. If the US dollar rises further, it may likely target the 0.965 level. At yesterday's close, the greenback-loonie pair was quoted at 0.9612.
Traders are now likely to focus on the European session, in which final readings of services PMI for June from the major European economies and the Eurozone May retail sales are expected to influence trading.
The U.S. factory goods orders report for May is due at 10:00 am ET.