The dollar retreated on Tuesday following an overnight rally that saw investors flocking to the safe-haven currency on worries over China's COVID flare ups, though cautious risk sentiment kept the greenback supported.
The fresh bout of risk aversion had weighed particularly on the antipodean currencies - often used as liquid proxies for the Chinese yuan - with the Aussie sliding nearly 1% overnight. It recouped some losses on Tuesday, rising 0.14% to $0.6615.China's capital warned on Monday that it was, with a surge in COVID cases sparking fresh restriction measures. Deaths from the virus were also recorded in Beijing for the first time since late May.
"The situation in China is deteriorating. There does seem to be some ... increased restrictions on movement of people, and I think there's going to be inevitable economic impacts," said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.Similarly, the euro was up 0.12% at $1.0253, after its 0.8% overnight loss, while sterling rose 0.25% to $1.1845, partially reversing its 0.6% fall overnight.
The Japanese yen last traded 0.2% higher at 141.79 per dollar, after slumping more than 1% to the weaker side of 142 per dollar in the previous session. "It's more like a cork in the ocean, subject to risk aversion as well as movements in 10-year Treasury yields."
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