LONDON : The Norwegian crown and the Australian dollar recovered some ground on Tuesday after hitting their lowest levels in nearly two years against the U.S. dollar, tracking a rebound in European stock markets after a sharp selloff.

The dollar edged lower but safety flows kept the safe haven near 20-year highs, while risk aversion kept the euro flat.

Commodity currencies fell overnight to multiple-year lows and oil prices fell more than 1 per cent, hurt by fears of recession and an economic slowdown in China, the top oil importer, before trimming some of those declines.

The Australian and Canadian dollars both edged both higher by 0900 GMT, after falling to their weakest since 2020. While the Norwegian crown rose 0.26 per cent to 9.6345 crowns per dollar, after falling to its lowest since June 2020.

“Commodity currencies have a high correlation with swings in market risk sentiment, and followed both yesterday’s equity sell-off lower and today’s recovery in European stocks higher,” said Francesco Pesole, FX strategist at ING.

European stocks bounced back after a sharp selloff on Monday, and China stocks also rebounded on Beijing’s vows to support its struggling economy, with signs of bargain hunting in both markets.

Any further recovery in risky currencies should come mostly to the detriment of the dollar, Pesole added. “However, we do not expect any correction in the dollar to have long legs in the current market environment”.

The euro flattened on the dollar at $1.0563, and sterling rose 0.1 per cent to $1.2340.

“I would still describe sentiment as fragile given the overhang of the war in Ukraine, Fed tightening and COVID restrictions in China,” Jane Foley, head of FX strategy, at Rabobank in London.

“Medium-term, we expect the USD to remain well underpinned by safe haven flows,” she added.

The dollar index, which measures the greenback against six peers fell 0.13 per cent to 103.58, having risen as high as 104.19 on Monday, a 20-year peak.

Also a factor in the slightly weaker dollar were overnight remarks from Atlanta Fed President Raphael Bostic who hosed down talk of a 75-basis point rate hike at the Fed’s next meeting, causing U.S. Treasury yields to pause their march higher.

The Aussie dollar was last up 0.2 per cent at $0.6966, after dropping as low as $0.6911, to its weakest since July 2020, having fallen 1.7 per cent overnight. While the Canadian dollar edged 0.2 per cent higher to C$1.29910, after dropping to its weakest since November 2020.

There was also excitement in crypto markets, where bitcoin fell below $30,000 for the first time since July 2021, before bouncing to trade 2.9 per cent firmer at around $31,800.

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