LONDON, November 16, Reuters -- The dollar was just below a 16 month high against the euro on Tuesday, while the yuan hit its strongest in more than five months as markets welcomed dialogue between the U.S. and Chinese presidents.
In the talks that gave Asian currencies a lift overnight, both U.S. President Joe Biden and Chinese leader Xi Jinping stressed their responsibility to the world to avoid conflict. The talks did not seem to lead to a breakthrough, but support for riskier currencies fell somewhat as the talks did not seem to lead to any breakthrough.
The dollar hit a five-month low against China's offshore currency overnight, at 6.3615, and the pair was still down 0.1% at 0850 GMT, at 6.3767, down around 0.1% on the day.
The Australian dollar, which is seen as a liquid proxy for risk appetite, has lost its overnight gains by early European trading, down 0.1% on the day at $0.73425.
The dollar index was a bit lower at 95.446 after U.S. inflation data showed consumer prices surged to their highest level since 1990, fuelling speculation that the Federal Reserve may raise interest rates sooner than expected.
The outlook for interest rates could be affected by the U.S. retail sales data due later in the session.
The euro was not changed much on the day, after recent losses on Monday after dovish comments from European Central Bank President Christine Lagarde.
Lagarde said that tightening monetary policy to control inflation could choke off the euro zone's recovery, which was seen as a push back on calls and market bets for tighter policy.
Even if lower-than-consensive economic data is released in the U.S. this afternoon, we doubt that this is going to alter the scenario now that selling EURUSD is favored, UniCredit strategists wrote in a client note.
The euro, as well as rising COVID 19 cases, were hurt by rising COVID 19 cases in Europe, according to analysts.
On Monday, Austria imposed a lockdown on unvaccinated people, while Germany's parliament is due to vote on stricter measures to deal with surging cases. France, the Netherlands, and many countries in Eastern Europe are experiencing a surge in infections.
In a client note, Lee Hardman said that the situation could cause a more significant tightening of restrictions in the coming months and hurting sentiment towards European currencies.
The British pound was up 0.4% against the dollar at $1.3467, after data showed British employers hired more people in October after the government's job protection scheme ended.
The Swedish crown was up around 0.2% against the dollar at 8.789. The Swedish headline inflation hit a fast pace since 2008 in October, according to the data on Monday.
The rise in inflation will be called by the Riksbank next week, said Commerzbank FX and EM analyst You-Na Park-Heger in a client note.
The price of the criptocurrency was down around 4.5% on the day, at $60,750.