The bullish moves in the US dollar takes somewhat of a breather into early trading on Wednesday, despite enjoying support from an uptick in US Treasury yields even as most of the other major currencies trade under pressure due to reigning uncertainties. At the time of writing, the US dollar index DXY is trading around 96.51.

The climb higher in the greenback is keeping investors on edge and away from Asian markets even as they anticipate a weakness in several emerging currencies as well. One of the most affected by the recent strengthening in the US currency is the Chinese yuan, which already faces uncertainties and downside pressure on account of the latest outbreak of COVID-19 cases across the country.

The previous session saw the US dollar receive additional support from stronger than expected economic data releases. Jobless claims, growth and Fed’s preferred inflation measure, all posted a strong improvement and further raised expectations of a faster than planned rate hike by the Fed.

Meanwhile, Europe’s latest spike in coronavirus cases and resulting lockdowns have kept the common currency under severe pressure. Although, EUR/USD sits above the 16-month low after optimistic European business surveys offered support to the common currency during the previous session.

NZD/USD saw some volatility in the early Asian session after the RBNZ hiked interest rates by 25bp while raising the long-term cash rate projection by 50bp. While the rate hike was mostly priced in by markets, there was some disappointment as some economists expected a more hawkish announcement of a 50bp rate hike instead during the latest meeting.