Dollar knocked from 20-year high, yuan regains growth

The dollar fought for a footing on Tuesday and the tumbling Chinese yuan found a floor as investors trimmed bets on whether US interest rate rises will drive further dollar gains.

The greenback has edged from a two-decade high this week and was a touch softer across the board in early Asia trade, while US bond yields have pulled back slightly as traders reckon aggressive near-term hikes will drag on longer-run US growth.

The euro rose about 0.1 percent on the dollar to $1.04 and the Australian and New Zealand dollars lifted about 0.1 percent and are off multi-year lows.

China's yuan was steady at 6.79 per dollar in offshore trade and seems to be finding a base after sliding more than 6 percent in a month. Hopes for an end to Shanghai's strict COVID-19 lockdown have offset poor April economic data and traders are also encouraged by more signs of policy support.

China cut mortgage rates for first-home buyers over the weekend and on Monday, sources told Reuters that authorities had asked some financially healthy property developers to sell bonds to help boost market sentiment.

"Dollar/CNH has been a big driver of G10 currencies," said Chris Weston, head of research at brokerage Pepperstone in Melbourne, referring to offshore yuan. He added that a pause in its slide as well as a calming of markets' volatility generally has paused dollar gains, for now.

"A lot has been priced in and we're not getting any new news from Fed officials," he said. "I think people are just taking some of that money off the table at the moment."

Sterling has bounced about 1.5 percent from a two-year hold and was steady at $1.23 on Tuesday. The yen held at 129.11 and is holding above a two-decade trough. The US dollar index dipped marginally to 104.10 and is about 0.8 percent below Friday's 20-year peak of 105.10.

Global interest rate expectations are also growing more hawkish.

The gap between 10-year German and US real yields has narrowed by more than 30 basis points this month and central banks in Britain and Australia have raised rates.

Minutes from the Reserve Bank of Australia's May meeting are due later in the day as are public appearances from several Federal Reserve officials, including Chairman Jerome Powell. The Australian dollar last bought $0.69 and the New Zealand dollar was $0.63.