Dollar under pressure as U.S. Treasury yield drops

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Dollar under pressure vs safe-haven currencies as yields fall.

LONDON, Aug 3 - The U.S. dollar became the biggest gainer among major currencies on Tuesday, helped by talk from their central banks, while the New Zealand and Australian currency took a back seat to the Japanese yen and Swiss franc amid some risk aversion in markets.

The AustralianAustralian dollar rose after the Reserve Bank of Australia stuck with its plan to suspend its bond buying program, shrugging off concerns about the economic impact of rising coronavirus cases. It gained half a percent against its US counterpart to $0.7393.

The Kiwi Dollar climbed 0.6% to $0.7007, after New Zealand's central bank announced on Tuesday that it would soon begin consulting on ways to tighten mortgage lending standards as it tries to control an inflated housing market and protect home buyers.

The U.S. dollar declined 0.1% to 109.21 yen, near its June 19 lowest level of 109.07, which was its lowest level since late May. Against the Swiss franc, the dollar traded 0.9046 Franc having hit a 1 - 2 month low of 0.9038 in the previous session.

What we're seeing is a G 10 FX market that is typical for this time of year - there's always a summer lull when volumes drop significantly but also typical of the quiet we've seen lately in the days leading up to a nonfarm payrolls number, said Michael Brown, senior market analyst at CaxtonFX.

The Fed have been incredibly clear in the importance of labour market data, so it's no surprise to see a bit of apprehension before the report drops.

Market watchers have pointed to the sharp decline in U.S. Treasury yields as indicative of fears of a coming disappointment in economic growth.

The U.S. Treasury yield dropped on Monday, shortly after an Institute for Supply Management report showed July U.S. manufacturing growth slowed for the second consecutive month.

Clouding the outlook further is the spread of COVID - 19 Delta variant. In the United States, COVID - 19 hospital admissions in Louisiana and Florida have hit a new peak, though top U.S. health expert Anthony Fauci has ruled out another lockdown in the country.

That outweighed any excitement over a $1 trillion infrastructure investment bill that could be ready for final vote as early as this week.

The euro was a touch higher at $1.1880, having lost momentum after hitting a month high of $1.1909 on Friday. Sterling rose 0.2% to $1.3914, just off the one-month high of $1.39835 on Friday.

At the end of the day, there's nothing we can do except wait and see how Delta will or won't change the Federal Reserve's policy stance, said Kazushige Kaida, head of FX sales at State Street Bank's Tokyo branch.

On Monday, Japan extended state of emergency limits to more regions and cases hit a record in Tokyo.