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Dollar Loses Ground Against Other Major Currencies

The U.S. dollar retreated after a steady start Tuesday, hurt by worries about the spread of coronavirus across several states in the U.S. The dollar's movements were impacted by economic data from the U.S., and other parts of the world.

The dollar index, which dropped to 97.23 from a high of 97.80 touched in the European session, later recovered to 97.40, but was still trailing its previous close by about 0.16%.

Against the Euro, the dollar weakened to $1.1263, but later firmed up to $1.1235, down just marginally from previous close of $1.1244. Eurozone inflation rose to 0.3% from 0.1% in May. Economists had forecast the rate to remain unchanged at 0.1%. Headline inflation continued to remain well below the European Central Bank's target of "below, but close to 2 percent."

Against Pound Sterling, the dollar slipped to $1.2403, losing more than 0.8%. Revised data from the Office for National Statistics showed that the UK economy contracted at the joint fastest pace since 1979 as measures taken to reduce the spread of coronavirus weighed on all sectors.

Gross domestic product fell 2.2% sequentially instead of 2% decrease estimated initially and followed a nil growth in the fourth quarter of 2019. The latest drop was the joint largest contraction since the third quarter of 1979. On a yearly basis, GDP was down 1.7% in the first quarter, revised down from 1.6% estimated in May.

The Japanese currency weakened to 107.90 a dollar, losing more than 0.3%. Industrial output in Japan plummeted 25.9% on year in May, the Ministry of Economy, Trade and Industry said. That was well shy of expectations for a drop of 11.3% following the 15% decline in the previous month. On a seasonally adjusted monthly basis, industrial production sank 8.4% - again missing estimates for a drop of 5.6% following the 9.8% slide in April.

The Aussie was stronger by nearly 0.6% at US$0.6905, gaining from $0.6866.

The Canadian dollar was up at C$1.3576, gaining from C$1.3659

Swiss franc was trading at 0.9474 a dollar, gaining 0.4%, after data showed a jump in Swiss retail sales. Switzerland's retail sales grew for the first time in three months in May as measures to contain the spread of coronavirus were relaxed, data from the Federal Statistical Office showed. Retail sales rose a working-day adjusted 6.6% year-on-year in May, after an 18.8% fall in April, the data showed.

On a monthly basis, seasonally adjusted retail sales increased 30.7% in May, after a 13.7% fall in the prior month.

In U.S. economic news, the Conference Board released a report showing a bigger than expected improvement in consumer confidence in the month of June.

The Conference Board said its consumer confidence index jumped to 98.1 in June from a downwardly revised 85.9 in May. Economists had expected the consumer confidence index to climb to 90.0 from the 86.6 originally reported for the previous month.

Meanwhile, a separate report released by MNI Indicators said its Chicago business barometer rose to 36.6 in June from 32.3 in May, but a reading below 50 still indicates a contraction in regional business activity. Economists had expected the index to jump to 45.0.

Traders also kept an eye on Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin's testimony before the House Financial Services Committee regarding the response to the coronavirus pandemic.

In prepared remarks, Powell noted that output and employment remain far below their pre-pandemic levels and cautioned that the outlook for the economy is "extraordinarily uncertain."

"A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities," Powell said.

He added, "The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed."

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