Euro resumes weakness against dollar as Fed rate hike back in focus

After a bit of a flight-to-quality rally early on Monday in reaction to the Paris attacks, some risk appetite returned to the markets on Tuesday. The geopolitical concerns in global markets were short-lived and there is now a return to riskier assets as investors unwind some of their positions in safe havens such as the yen or gold.
The euro retains its weakness driven by risk aversion though but this is also due to the stronger dollar, as focus returns to the story of divergence between the monetary policies of the Federal Reserve and the European Central Bank.

The Federal Reserve will publish minutes from its October meeting on Wednesday, so market attention will turn to this event. Meanwhile, later today, U.S. inflation data are scheduled to be released, which are also important to watch out for.

The euro weakened 0.3 percent to $1.0659. The yen was down 0.2 percent to 123.37 per dollar. The kiwi dropped 0.5 percent. Australia’s currency was at 70.85 U.S. cents after minutes of the Reserve Bank’s Nov. 3 meeting showed policy makers are relying on record-low interest rates to boost consumption and support the economy as China’s outlook remains a key uncertainty.

Oil halted its gains near $42 a barrel before U.S. government data forecast to show crude stockpiles expanded for an eighth week in the world’s biggest consumer. Gold traded around $1,080.

Equities markets in Asia recovered on Tuesday, with the Shanghai Composite Index advancing 1.4 percent. The MSCI Asia Pacific Index climbed 1.3 percent, the Hang Seng Index advanced 2.1 percent in Hong Kong while Japan’s Topix index advanced 1.2 percent as the yen extended Monday’s decline against the dollar.

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