On Tuesday, the greenback was steady close to two-month highs versus the other major currencies, aided by the near-term interest rate increase prospects.

The U.S. dollar index perched at 95.78, below yesterday’s highs of 95.96, the highest since March 29.


Dollar demand remained strong after Federal Reserve Chief Janet Yellen announced on Friday that it would be appropriate for the central bank to push up rates in the approaching months in a steady and careful manner if the economy and the labor market continue to pick up as assumed.

The Fed last increased interest rates in December, the first time after almost ten years.

Higher rates are an advantage for the dollar because they turn the greenback more enticing to yield-seeking investors.

Investors focused on the previous U.S. nonfarm payrolls May report last Friday for new signals on the labor market’s strength.


Meanwhile, the greenback eased versus the yen; the USD/JPY slipped 0.17% to 110.93, breaking Monday’s three-week peak of 111.44. After data overnight revealed that Japanese factory production unexpectedly soared in April despite the reported earthquakes in its south, the Japanese currency found support.

The aforementioned data lightened anticipations that the Bank of Japan could ramp up its monetary easing as soon as June, after Prime Minister Shinzo Abe stated plans to delay a scheduled sales tax hike on Monday.

Aussie Surges due to Economic Data

Elsewhere, the Australian dollar went stronger in the wake of upbeat domestic economic data. AUD/USD was up 0.75%, reaching the peak of 0.7250 after reported data showed strong surges in net exports and building approvals.


On Tuesday, the Australian Bureau of Statistics reported that building approvals rocketed by 3.0% in April, defeating outlooks for a 3.0% decline.

Australia’s account deficit at present reduced to A$ 20.8 billion in the first quarter from A$ 22.6 billion of 2015’s fourth quarter, according to a separate report. Analysts had predicted the current account deficit to narrow to A$ 19.5 billion in the previous quarter.

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