SINGAPORE/TOKYO--The dollar found some footing on Tuesday, rising against tearaway commodity currencies for the first time in June as investors paused to take profits.

However, a stronger yen pointed to some trepidation over the U.S. Federal Reserve’s next move at its two-day meeting starting later in the day.

The Australian dollar, which touched a 10-month top of $0.7043 early in the Asia session, retreated 1 percent to $0.6948 after China’s education ministry warned students to carefully consider studying there amid tension between the trading partners.

The Kiwi also pulled back after hitting a four-and-a-half-month high on the first morning since New Zealand ended all social restrictions--save for its closed borders--after the nation declared it was free of the coronavirus.

That has the Antipodean pair snapping nearly two weeks of gains that had propelled them some 4 percent or more higher this month.

“There is discomfort that the glass has gone from half-full to overflowing,” DBS Bank analysts said in a note. “If dollar/yen returns lower into 106-108 ... it could herald some hiccups in the seemingly unstoppable risk rally.”

The yen sat on the edge of that range at 107.97 per dollar, gaining as investors weighed the possibility of stepped-up bond buying--or even simply a very dovish outlook--from the Fed.

“Japanese names have been very active since Monday in dollar/yen, trying to trade off the chance of some kind of yield-curve control from the Fed,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

“I personally don’t think yield curve control is necessary now, but the dollar is under clear selling pressure.”

Elsewhere the Chinese yuan gave back its overnight gains, while other moves were mostly held in check as markets wait for the outcome of the Fed meeting.

The pound edged up to a three-month high before retreating to $1.2700. The euro last sat steady at $1.1272.

A statement from the Fed is due at 1800 GMT on Wednesday followed by a news conference half an hour later.

It is not expected to change interest rate settings though in recent days futures pricing shows investors have abandoned expectations of rates dipping below zero next year.

GOING UP DOWN UNDER

The latest round of exuberance, which continues to drive stock markets higher, was last week’s U.S. jobs data for May.

An increase in employment caught markets completely by surprise and together with a smaller-than-expected fall in Chinese exports last month, have pushed the trade-sensitive Aussie and Kiwi to milestone highs.

Even after dipping on Tuesday, the Kiwi is up 5 percent on the dollar this month and the Aussie 4 percent.

“Economies are smashed, but not smashed as badly as was expected, and I think that’s the key to this whole rally,” said Westpac FX analyst Imre Speizer in Auckland.

“The latest high-frequency data shows you that the recovery probably looking more like a V. It’s a relief rally, relief that it’s not as bad as feared.”

In New Zealand, an ANZ survey of traffic movement--seen as a forward indicator of economic growth--saw a sharp rebound in heavy vehicle traffic last month.

The virus also appears to be in retreat in Australia where reopening is gathering pace, prompting RBC Capital Markets to make a modest improvement in its 2020 GDP forecast on Monday lifting it to better than -4 percent from -4.5 percent.

The World Health Organization on Monday warned that the COVID-19 pandemic is “far from over,” as a record number of new daily infections were reported.

But investors took comfort from cases trending lower in the United States and falling to a fresh low in New York, even as testing has ramped up.

“If we continue to trend lower ... this will go a long way in realigning consumer risk assessment about the virus,” said RBC Capital Markets’ Chief U.S. Economist, Tom Porcelli.

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