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The dollar rose in trading on Tuesday, ahead of the release of key retail sales data, while the Chinese yuan benefited largely from a friendly dialogue between the presidents of the United States and China during a virtual meeting.
The dollar index, which measures the greenback against a basket of six other currencies, was up 0.1% at 95.468, near a new 16-month high.
While the US dollar against the Chinese yuan fell 0.1% to 6.3777, just above the five-month low recorded earlier in the session, after a hypothetical meeting between US President Joe Biden and his Chinese counterpart, Xi Jinping, went relatively smoothly, although This was not without any hugely positive news.
Leaders of the world’s two largest economies have agreed on the need for increased communication and cooperation between the two countries, a positive tone that has left markets looking at the possibility of lowering trade tariffs in the near future.
In addition, GBPUSD rose 0.3% to 1.3451 after stronger-than-expected UK employment data, raising the chance that the Bank of England will raise interest rates in December.
EURUSD rose 0.1% to 1.1375, rebounding after earlier dropping to a 16-month low, as the European region was once again hit by a new wave of COVID-19 cases.
Countries like Austria and the Netherlands have also already implemented partial lockdowns, and a number of others are considering such moves in the run-up to Christmas and the winter season.
While European Central Bank President Christine Lagarde was adamant in her testimony in the European Parliament on Monday that the central bank will not rush to raise interest rates, this pessimistic stance is weighing on the single currency.
USDJPY rose 0.1% to 114.25, while USDJPY fell 0.1% to 0.7339 after Reserve Bank of Australia President Philip Lowe once again pushed the idea of raising interest rates as soon as possible by 2022.
