Currencies: ‘Turnaround Tuesday’ sends dollar to nearly 4-month high versus euro

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The U.S. dollar advanced Tuesday, reversing course after broadly moving lower in the prior session, Investors are waiting to hear from departing Federal Reserve Chairwoman Janet Yellen, who has been overseeing a gradual rise in interest rates.

What were currencies doing?

The ICE U.S. Dollar Index
DXY, +0.27%
which measures the buck against six rivals, rose 0.3% to 95.073. The broader WSJ U.S. Dollar Index
BUXX, +0.40%
rose 0.4% to 88.02, around its highest since July.

The euro
EURUSD, -0.3187%
fell to $1.1576, down from $1.1610 in the prior session, and traded around its lowest since late July, according to FactSet data.

Against Japan’s currency
USDJPY, +0.32%
the dollar edged back above the ¥114-mark, trading at ¥114.27, up from ¥113.71 late Monday, marking a six-month high.

Against the Canadian dollar
USDCAD, +0.7636%
the buck climbed to C$1.2807 from C$1.2704, unable to find traction as oil prices stuck largely around their highest in more than two years. Traders also awaited a speech by Bank of Canada Gov. Stephen Poloz later in the session.

In Australia, the Aussie dollar
AUDUSD, -0.7411%
slipped to a four-month low of $0.7634, compared with $0.7691 late Monday, after the Reserve Bank of Australia left its key interest rates unchanged. The currency briefly jumped against its U.S. counterpart after the decision, but then trended lower as soggy economic data continues to overshadow the Australian economy.

The British pound
GBPUSD, -0.2657%
bought $1.3112, down from $1.3171 on Monday when it surged 0.7% against the greenback.

What’s driving the market?

The greenback “is benefiting from a Turnaround Tuesday,” said Brown Brothers Harriman in a note. So-called commodity currencies pulled back after climbing Monday alongside a surge in oil prices to more than two-year highs. The dollar jumped roughly 0.9% against the Brazilian real
USDBRL, +1.1633%
and 1.5% against the Russian ruble
USDRUB, +1.6693%
on Tuesday, according to FactSet data.

Yellen will be in focus during afternoon trade in the U.S. The outgoing chairwoman will accept an award related to ethics in government, but investors will still tune in to see if she makes comments specific to monetary policy. Markets are widely pricing in a potential rate increase by the central bank when it meets in December. Yellen’s speech is slated to start at 3 p.m. Eastern Time in Washington, D.C.

At 12:35 p.m. Eastern, the central bank’s vice chairman for supervision, Randal Quarles, is slated to talk at a conference focused on banking regulations and the payments industry.

Read: What a Jerome Powell Fed means for investors and the economy

Earlier Tuesday, European Central Bank President Mario Draghi spoke about banking supervision.

The euro was under pressure even after eurozone retail sales for September exceeded expectations.

What are strategists saying?

“We remain in a state of equilibrium in FX, but the currency markets are slowly starting to appreciate the relative hawkishness of U.S. monetary policy. While the Fed remains cautious in its outlook, it nevertheless appears committed to a tightening path,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note. “Other G-7 central banks are far more hesitant in their policy actions.”

“This week’s eurozone data has been mostly better than expected, but this hasn’t stopped the euro from falling to a four-month low against the dollar today,” wrote Fawad Razaqzada, technical analyst at Forex.com.

He said the shared currency has been under pressure since the ECB last month said it would extend its quantitative-easing program by at least another nine months starting from January, while halving the pace of asset purchases to €30 billion a month.

“If the EUR/USD has any chance of making a good comeback, it will first need to reclaim some broken support levels now,” said Razaqzada, noting the currency pair is below last year’s high of $1.1615. A “rise above 1.1615 would be bullish in the short-term outlook…Meanwhile if the downtrend continues, then the next big target for the bears would be the psychologically-important 1.15 handle,” he said.

What are the data?

Job openings rose in September, remaining close to a record high. Openings stood at 6.04 million, slightly below FactSet consensus expectations of 6.05 million.

September consumer credit data is due at 3 p.m. Eastern.

Read:China’s forex reserves grow for 9th month in a row

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