Greenback stands firm after rallying on upbeat U.S. data, markets focuses to RBA

strength in greenback

Tuesday, after rallying on positive United States data that boosted Treasury yields to seven-week highs, the greenback firmly hold its ground against its six major currency rivals. The dollar index was a bit lower at 96.125 this is after rising 0.6% overnight as a surprisingly strong rise in the June ISM or Institute of Supply Management nation factor activity index pushed the 10-year Treasury yield to its highest since May 16.

These developments have helped the dollar index recover from a nine-month low of 95.470 followed on Friday. On the other hand, the focus has now altered towards the Reserve Bank of Australia’s monetary policy decision to see if it would join the growing list of central banks that adopts an aggressive move of tightening their monetary policy.

Shin Kadota, senior strategist in Barclays in Tokyo said that the greenback’s latest rise is driven by direct demand, as opposed to the U.S. currency gaining thanks to the weakness of its peers. He also added that expectations towards the Fed’s hiking interest rates which is expected to occur later this year had perhaps sunk too low.

On the other hand, markets we’re attentively focused on Reserve Bank Australia’s policy decision due later in the day. Although the RBA is not expected to hike interest rates this time, some market participants are looking for any signs of central bank joining a shift towards an aggressive stance by peers like the ECB or the European Central Bank, the Bank of England and the Bank of Canada.

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