The low-yielding US dollar and yen faltered on Tuesday, weighed down by a strong rally in stocks and an improving global backdrop that spurred investors to seek higher returns in other riskier currencies. A solid Spanish bill auction and upbeat German investor sentiment gave investors the go-signal to temporarily leave dollar and yen safety and briefly gave the euro support versus the greenback.
The Canadian dollar led all riskier currencies, jumping more than 1 percent after the Bank of Canada said it may need to start hiking rates due to firmer-than-expected growth and inflation. Sterling, the Australian and New Zealand dollars also posted gains against the greenback, reflecting investors' increased appetite for risk.
In midday New York trading, the dollar index slipped to 79.529. The euro was also 0.1 percent lower at $1.3122 after earlier surpassing Monday's high to hit $1.3173. The euro was up 0.4 percent at 105.93 yen, recovering from a trough of 104.63 yen on Monday - a level not seen since mid-February. The Canadian dollar, meanwhile, posted steep gains against the US dollar, which fell more than 1.0 percent to C$.0.9869. The dollar rose 0.4 percent against the safe-haven yen to 80.69 yen - above a seven-week low of 80.31 hit on Monday.