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Dollar Retreats Amid Increased Risk Appetite After Fed Move

By Gina Lee

Investing.com – The dollar was down on Tuesday morning in Asia, reacting to the U.S. Federal Reserve’s announcement on Monday that it would start purchasing a more diverse range of investment grade U.S. corporate bonds.

Investor risk appetite increased as the Fed aims to secure companies’ access to cash as well as ensure credit market liquidity amid the economic impacts of the COVID-19 virus.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.23% to 96.425 by 11:40 PM ET (4:40 AM GMT).

"It's a dramatic turnaround...it just seems to reinforce that message that you shouldn't and can't fight the Fed here, and everything follows from that really," National Australia Bank (OTC:NABZY) head of FX strategy Ray Attrill told Reuters.

The USD/JPY pair gained 0.16% to 107.48, with the safe-haven yen sticking within a range it has held since April and indicating that some investors were being cautious.

"The key question for investors and traders is whether the gains represent a change in sentiment or a short-term sugar hit," CMC Markets' chief strategist, Michael McCarthy, told Reuters.

Meanwhile, the riskier Antipodean currencies gained from the increased risk appetite. The AUD/USD pair gained 0.64% to 0.6962 and the NZD/USD pair rose 0.40% to 0.6498.

The Reserve Bank of Australia also released its minutes from its June meeting earlier in the day, which suggested that Australia’s economic downturn from COVID-19 was not as severe as feared.

The USD/CNY pair slid 0.22% to 7.0729, reversing its gains from the previous day.

The GBP/USD pair gained 0.52% to 1.2668, with investors looking to labor market data from the U.K. due to be released later in the day for the Bank of England’s next move when it announces its policy decision after its meeting on Thursday.

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