Dollar Slips; Aussie Dollar Gains Slightly After RBA Decision

The U.S. Dollar slipped on Tuesday after advancing earlier in the day and re-approaching the one-year high of 95.44 hit on July 19.

The U.S. Dollar Index, which tracks the greenback against a basket of currencies was down 0.02% at 95.17 by 1:30AM ET (05:30 GMT). Overnight, it edged close to the more-than-one-year high of 95.652 reached on July 19, before giving up some of its gains towards the end of the session.

Traders believe recent trade tensions between the U.S. and China may be supporting the dollar, as tariffs may narrow the U.S. trade deficit.

“There is still a lot of uncertainty on the tariffs. We don’t know exactly how much will be implemented and how bad it can get,” Shinichiro Kadota, senior FX and rates strategist at Barclays in Tokyo, told Reuters on Tuesday.

“If U.S. economic growth starts to slow down because of tariffs or because past tax-cut effects are waning, then I think the economic performance could fade, which could also lead to fading dollar strength,” he said.

Meanwhile, the Aussie dollar gained slightly against its U.S. counterpart, with the AUD/USD pair trading 0.08% higher to 0.7394 after the Reserve Bank of Australia kept its overnight rate unchanged at a record low of 1.50%. The central bank noted that it left its policy unchanged because low rates continued to support the local economy. It also added that it expects inflation to be higher in 2019 and 2020.

Elsewhere, the Japanese yen also strengthened agaisnt the dollar. The USD/JPY pair was 0.08% lower to 111.32 on Tuesday as it struggled to hold onto gains in recent weeks. The pair reached 112.0 last week.

Looking ahead, The U.S. and Japan are expected to have bilateral trade talks in Washington on Thursday.

Elsewhere, the USD/CNY pair climbed 0.06% to 6.8590 on Tuesday. The onshore yuan is near its lowest since May 2017, while the offshore yuan hit a 15 month low against the dollar on Friday as trade dispute between China and the U.S intensified.

The People’s Bank of China (PBOC) set the yuan reference rate at 6.8431 on Tuesday vs previous day’s close of 6.8519./

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