Forex Today: US Dollar retreats as mood improves

Here is what you need to know on Tuesday, August 22:

The US Dollar is having a hard time finding demand early Tuesday, with investors showing interest for risk-sensitive assets. July Existing Home Sales data will be featured in the US economic docket alongside the Richmond Fed Manufacturing Index. Later in the session, Federal Reserve (Fed) Governor Michelle Bowman and Chicago Fed President Austan Goolsbee will speak at the Fed Listens event titled "Joining the Labor Force After Covid —A Discussion on Youth Employment."

The S&P 500 and the Nasdaq Composite indexes closed in positive territory on Monday, while the Dow Jones Industrial Average registered small daily losses. S&P Global Ratings announced it lowered grades one notch for several medium-sized US banks, including KeyCorp, Comerica Inc., Valley National Bancorp and UMB Financial Corp.

In the meantime, the benchmark 10-year US Treasury bond yield reached its highest level in nearly 16 years at 4.36% before retreating toward 4.3%. Early Tuesday, US stock index futures trade in positive territory, reflecting the improving risk mood, and the US Dollar Index stays in negative territory near 103.00.

EUR/USD registered small gains on Monday and continued to push higher early Tuesday. The pair was last seen trading at its highest level in six days above 1.0920.

GBP/USD gathered bullish momentum and advanced toward 1.2800 early Tuesday following Monday's modest rebound. 

USD/JPY rose sharply on rising US Treasury bond yields but declined back below 146.00 during the Asian trading hours on Tuesday. Following his meeting with the Japanese Prime Minister Fumio Kishida on Tuesday, Bank of Japan (BoJ) Governor Kazuo Ueda said they did not discuss FX volatility at the meeting.

Gold price benefits from falling US yields and stretches higher in the European morning on Tuesday. At the time of press, XAU/USD was up 0.4% on the day above $1,900.

Bitcoin continues to fluctuate in a tight channel at around $26,000. Ethereum stays relatively quiet below $1,700 after losing more than 1% on Monday.