The dollar slumped to seven month lows against a currency basket on Tuesday and the safe haven yen strengthened broadly as investors grew more cautious amid fears over looming geopolitical risks.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 96.68 by 07.41 GMT after falling to an overnight low of 96.49, the weakest level since November 8.
The dollar came under pressure ahead of former FBI Director James Comey’s testimony to a Senate committee on Thursday.
Investors are fearful that the Trump administration may be further damaged by any revelations that may emerge when Comey testifies about Russia’s alleged involvement in the U.S. election.
The dollar was already on the defensive after last Friday’s disappointing U.S. jobs report.
Most analysts believe the poor data will not stop the Federal Reserve from raising interest rates at its meeting later this month, but most market participants now expect a more dovish path in the second half of the year.
USD/JPY was down 0.76% to 109.62, the weakest level since April 25.
Investors were also wary ahead of Britain’s election and a European Central Bank meeting, both of which are also set for Thursday.
While pollsters still expect British Prime Minister Theresa May will win the most seats in the election, a narrow win could throw Britain into political deadlock just days before formal Brexit talks with the European Union are due to begin on June 19.
Sterling pushed higher, with GBP/USD putting on 0.25% to trade at 1.2937.
The euro was a touch lower against the dollar, with EUR/USD at 1.1246, holding below the seven-month peak of 1.1283 set on Monday.
The single currency was sharply lower against the firmer yen, with EUR/JPY down 0.8% to 123.33.
Expectations are growing that the ECB could strike a less dovish tone at its meeting on Thursday after recent economic reports indicated that the recovery in the euro area is deepening.
Meanwhile, the Australian dollar was little changed with AUD/USD at 0.7483 after the country’s central bank kept interest rates on hold on Tuesday and said economic growth is still expected to increase gradually over the next couple of years.
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