The dollar posted sharp gains on Tuesday against the safe-haven Japanese yen and Swiss franc, rebounding from the prior day's huge losses, as investors hoped global monetary policymakers will launch further stimulus plans to ease the economic impact of the coronavirus outbreak.
The US stock market also rebounded Treasury yields rose across the board, as the market anticipated a news conference by US President Donald Trump on economic measures in response to the virus. Also, indications of further stimulus efforts by some governments helped steady the market after Monday's gyrations.
Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington, said the dollar's "cautiously improved tone today largely mirrors broader markets that anticipate tax cuts and other fiscal steps from the Trump administration to help ease the economic blow from the virus."
Some analysts said it was too early to predict a floor for the dollar, which plunged on Monday after an energy price war between Saudi Arabia and Russia triggered the biggest daily rout in oil prices since the 1991 Gulf War, and Treasury yields dropped further.
Against a basket of currencies, the dollar rose 0.5% to 96.448. It rose 2.7% against the yen to 105.10, considerably higher than Monday's 101.18 low. The yen also fell against the euro and the Australian dollar, after Bank of Japan officials indicated they were ready to ramp up stimulus if necessary, before a policy meeting next week.
The euro dropped 1.4% versus the dollar to $1.1292, down from $1.1495 on Monday, its strongest since early January. The dollar rose 1.5% against the Swiss franc to 0.9388 franc on Tuesday, recovering after three days of heavy selling pushed it to its lowest in almost five years. Data suggest the Swiss National Bank is now intervening to weaken its currency.
Sterling, meanwhile, fell 1.6% versus the US currency to $1.2910. Volatility has doubled in FX markets from the levels of late February, reaching its highest since early 2017, according to one index. Analysts said FX volatility, which has not jumped to the same extent as in equity markets, could rise further.
Commodity-linked currencies that tumbled on Monday following the crash in oil prices recovered slightly. The Norwegian crown added 1.3% versus the euro to 10.80, away from record lows but still off the 10.4 levels seen last week.
The Canadian dollar slipped 0.5% against the greenback, which rose to C$1.3736.
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