The dollar rose across the board in post holiday technical-driven trade on Tuesday, retracing nearly all of the losses made last week in the wake of disappointing US jobs data.
In a session with no key US indicators, the euro came under pressure after a weaker than expected reading in a closely-watched ZEW German investor confidence index, while soaring oil prices and falling Tokyo stocks weighed on the yen.
This in turn helped the dollar erase most of last week's losses and settle back into a familiar range held in the past five months or so.
"The catalyst for the dollar's weakness was Friday's payrolls but positioning is preventing the euro from moving higher. The ZEW index didn't help the euro either but US factors are going to drive the market," said Steven Saywell, senior currency strategist at Citigroup in London.
By 1130 GMT the dollar had risen two thirds of a percent to $1.2300 per euro, having fallen to a low of $1.2433 in the wake of the US jobs data on Friday.
The yen fell more than half a percent to 110.10 per dollar, down more than a yen from Friday's one-month high, after China's foreign exchange regulator said speculation of yuan appreciation soon is "groundless".
The State Administration of Foreign Exchange also said China will not take an "unwise move" of one-off yuan revaluation.
Speculation of the yuan has resurfaced in recent weeks as Washington raised pressure on China in the run-up to the presidential election. Asian currencies are largely seen moving higher if China loosens its peg and revalues the yuan.
Germany's ZEW index fell to 31.3, its lowest since June 2003, compared with a forecast of 36.5, due to concerns about a global growth slowdown and rising oil prices. Oil prices set new record highs above $54 a barrel on Tuesday. Tokyo's Nikkei stock average fell 1.3 percent.
"It's a consolidation after a rally in major currencies against the dollar after the payrolls. The market is chopping back and forth because there's no obvious data trigger," said Frida Gjorstrup, currency strategist at J.P. Morgan.
"The Nikkei took a hit from high oil prices and we are seeing a follow-through in the yen."
Elsewhere, sterling fell sharply against the dollar and the euro after an unexpected fall in Britain's inflation rate reinforced expectations UK interest rates might have peaked.
Investors are also paying attention to the equity market performance as the United States heads into a key earnings season. US stock futures were pointing to a weaker opening on Wall Street.
Intel, Yahoo Inc and Johnson & Johnson are reporting their third quarter earnings later on Tuesday. The US tax bill approved by Congress on Monday is also in focus with some analysts saying it could trigger dollar repatriation by US multi-nationals.
The bill includes a one-year window for US firms to bring home foreign earnings at a reduced tax rate of 5.25 percent instead of the normal 35 percent.
ABN Amro estimated the bill could see in the region of $50-100 billion of dollar buying by US multinational companies that hold retained foreign profits overseas.
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