The dollar fell against the yen, pound and euro on Tuesday but surged versus the yuan, as traders squared up ahead of the Fed and month-end while China-centric risk aversion helped the safe-haven Japanese currency.
Though the dollar benefited before the New York session from the Chinese stocks slide driven by regulatary concerns nL1N2P30EK, falling Treasury yields, as Wall Street's retreat, eventually hobbled the U.S. currency.
EUR/USD gained 0.19%, rebounding from earlier session lows of 1.1770 on EBS, which attracted buyers ahead of Monday's trough, propelling it past the 21-day moving average at 1.1824 for the first time since June 11, when it was at 1.2187.
Headline U.S. durable goods orders missed, but the core and upward revisions yielded a solid report.
Consumer confidence also beat nL1N2P312M but neither helped the dollar.
EUR/USD's recovery remains a correction of the downtrend since May unless it persists after the Fed and month-end.
GBP/USD, up 0.51%, surged into the London fixing from 1.3808 to 1.3884, a dollar loss not seen in other currencies at that time.
Risk-sensitive sterling overcame falling stocks, helped by Monday's improved UK COVID case update nL8N2P24ZI, the possibility that Britain's pandemic might be near its end nL8N2P32XR and strong July retail sales nL8N2P31V0.
Cable is approaching the 50% Fibo of its June-July dive and July high at 1.3911 from last week's 1.35725 trough.
Next week's BOE meeting will be eyed for any ramping up of rate hike expectations, now centered on Q2 2022.
USD/JPY fell 0.62%, taking it back below the last four days' lows, the 50% Fibo of the 109.07-110.59 July 19-23 recovery and into the daily cloud toward the 100-day moving average at 109.57.
Friday's 110.59 recovery high came shy of the July 14 swing high it needed to clear to target the 111.66 trend highs again.
Ten-year Treasury-JGB yields have been chopping lower since mid-May, making USD/JPY gains more dependent on rising stocks and the selling of yen to fund carry trades.
The cloud base rises to 109.29 on Wednesday for support ahead of the 109.07 July lows on EBS.
USD/CNH is up 0.68%, its biggest gain since February, to its highest since April with the CSI300 down 3.5% this week to its lowest since November.
Aussie fell 0.24%, caught in the China risk aversion while pandemic lockdowns persist in Australia.
Risk aversion pulled bitcoin and ether off Monday's recovery highs.
tech company earnings reports after the bell Tuesday will be scrutinized after the Nasdaq slumped and VIX rose, with further weakening likely to lift the yen, particularly against high-beta currencies.
Wednesday's Fed focus centers on tapering discussions and expectations of a plan announcement at the September meeting balanced against resurgent pandemic threats.
Treasury yield curve flattening and continued pricing in of rate hikes by late 2022 suggest waning confidence that the next tightening cycle will be extensive or that current high inflation will be persistent.
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