Investing.com - The dollar was broadly higher against the other major currencies on Tuesday, as the yen remained under pressure after ratings agency Moody’s downgraded Japan's sovereign debt rating and as markets were jittery ahead of the European Central Bank's upcoming policy meeting.
USD/JPY hit highs of 119.00, near Monday's seven-year peak of 119.14, before falling back to 118.92, up 0.45% for the day.
The yen remained under pressure after Moody’s downgraded Japan's sovereign debt rating by one notch to A1, citing “heightened uncertainty” over Japan’s ability to cut its fiscal deficit following a decision by Prime Minister Shinzo Abe to delay a planned sales tax hike.
The yen has weakened broadly since the Bank of Japan unexpectedly expanded its stimulus program in late October. In contrast, the Fed wound up its asset purchase program in October and is weighing whether or not the economy is strong enough to start raising interest rates next year.
Prime Minister Abe dissolved parliament earlier this month, clearing the way for elections to be held on December 15 to seek a fresh mandate for his economic policies, which call for a weaker yen. The decision came after data showing that Japan’s economy unexpectedly fell into recession in the third quarter.
EUR/USD slipped 0.26% to 1.2437, off overnight lows of 1.2418.
The euro remained under pressure after data on Friday showed that the annual rate of euro area inflation slowed to a five year low of 0.3% last month, down from 0.4% in October.
The weak data added to pressure on the ECB to step up measures to spur growth and stave off the threat of deflation ahead of its upcoming policy meeting on Thursday.
Sentiment on the single currency also remained vulnerable after data on Monday showed that the euro zone’s manufacturing purchasing managers' index slowed to 50.1 from a preliminary reading of 50.4 last month, just barely above the 50 level separating growth from contraction.
Earlier Tuesday, official data showed that the number of unemployed people in Spain declined by 14,700 in November, compared to expectations for an increase of 57,300, after a 79,200 rise in October.
The pound and the Swiss franc were also lower against the dollar, with GBP/USD down 0.38% to 1.5671 and with USD/CHF gaining 0.36% to 0.9680.
Earlier Tuesday, market research firm Markit and the Chartered Institute of Purchasing & Supply said that their U.K. construction PMI declined to 59.4 in November from a reading of 61.4 in October.
Economists had expected the index to fall to 61.2 in November.
AUD/USD pulled away from four-year lows but was still down 0.51% at 0.8450 after the Reserve Bank of Australia left its benchmark interest rate at a record-low 2.50%, saying "the most prudent course is likely to be a period of stability in interest rates."
Meanwhile, NZD/USD slid 0.41% to 0.7833 and USD/CAD rose 0.37% to trade at 1.1370.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was up 0.33% to 88.32, not far from last week's more than four-year highs of 88.52.