Band Elizabeth Howcroft

LONDON, February 1 (Reuters) – The dollar fell for a second consecutive session on Tuesday, surpassing the 19-week high reached in late January, while risk-sensitive currencies such as the Australian dollar and the pound gained.

After falling nearly 5% in January, global equities entered a slightly stronger February and currency markets also reversed course.

After hitting a 19-month high last week, the US dollar index fell on Monday. On Tuesday, it was down 0.4% on the day at 96.281 at 1223 GMT =USD.

The Euro-Dollar strengthened, up 0.3% on the day to $1.12705 EUR=EBS.

The dollar’s decline could be due to month-end flows that forced investors to sell dollars last week.

The improvement in risk appetite seen in equity markets could also play a role, as the dollar is seen as a safe haven currency.

But investors and analysts also believe that, when it comes to the path of rate hikes in major economies, the euro could be more attractive than previously thought, according to Neil Jones, head of currency sales at Mizuho.

The market currently expects no less than five US Federal Reserve rate hikes this year, with the first hike expected in March, according to Refinitiv data on Eikon. IRPR.

Meanwhile, the European Central Bank is maintaining its ultra-loose monetary policy and has pushed back against all market expectations for ECB rate hikes this year.

Mizuho’s Jones said some of the dollar’s losses could come from the idea that the difference between the ECB and the Fed could narrow.

“From a market perspective, some think maybe the ECB will hike rates and simultaneously the Fed might not go as far as five hikes this year,” he said, citing conversations with clients. and analysts’ observations.

German inflation data on Monday was well above expectations, with consumer prices rising 5.1% year-on-year in January from 5.7% in December.

“If Eurozone inflation data also surprises on the upside tomorrow, the market could be betting on a more hawkish ECB. This means the euro could find additional support ahead of the (ECB’s) meeting. ) from Thursday,” the Commerzbank FX and EM analyst said. You-Na Park-Heger wrote in a note to clients.

Elsewhere, the dollar also fell against the Japanese yen, with the pair at 114.635 JPY=EBSand hit a six-day low against the Swiss franc CHF=EBS.

The Australian dollar fell sharply overnight after the Reserve Bank of Australia (RBA) postponed expectations of near-term rate hikes until inflation was higher.

But the “risky” tone in the markets meant it recovered quickly and rose 0.5% on the day to $0.71045 at the start of European trading. AUD=D3.

The British pound rose 0.3% to $1.3488 GBP=D3.

In cryptocurrencies, bitcoin rose 0.6% to around $38,714, still well below November’s all-time high of $69,000. BTC=BTSP.

India’s finance minister said the central bank will introduce a digital currency in the next fiscal year, using blockchain technology.

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(Reporting by Elizabeth Howcroft Editing by Alexander Smith and Mark Potter)

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