22.05.201801:59:00UTC+00Dollar Drops from 5-Month Peak, Fed Minutes in Focus

The dollar stood below a five-month peak versus a basket of currencies on Tuesday, catching its breath after a broad rally inspired by rising U.S. bond yields and relief at an easing of U.S.-China trade tensions.

The dollar's index against a basket of six major currencies last stood at 93.564, down from a five-month peak of 94.058 set on Monday.

The greenback's jump to that Monday high had marked a gain of 5.4 percent in about a month, compared to a mid-April trough of 89.229, which was its lowest since late March.

Optimism about synchronous global economic growth had been one of the factors that had weighed on the dollar earlier this year. Over the past month, however, the dollar has been buoyed by generally strong U.S. economic data that has backed the Federal Reserve's monetary policy tightening stance this year, as well as rising U.S. bond yields that bolstered the greenback's yield appeal.

The prospect of a resolution to the U.S.-China trade tensions has further added to the dollar's strength.

Against the yen, the dollar slid 0.1 percent to 110.89 yen, down from Monday's four-month peak of 111.395 yen.

The euro traded at $1.1782, near a more than six-month low of $1.1715 notched on Monday amid continued political uncertainty in Italy.

Italy's far-right League and the 5-Star Movement agreed on a candidate to lead their planned coalition government and to implement spending plans seen by some investors as threatening the sustainability of the country's debt pile.

This week will bring about a further test for determined euro bulls with the release of “flash" PMI data for May on Wednesday, and markets waiting to see whether the first-quarter slowdown in Europe spilled over to later months.