Commodity currencies climb as oil prices hit 6-month high

Commodity-linked currencies climbed on Tuesday as oil prices reached six-month highs, while a risk-on mood across markets dampened demand for the yen and the dollar ahead of U.S. inflation data later in the day.

Already lifted by rallying oil prices, the Aussie was given a further boost by minutes from the Reserve Bank of Australia (RBA), which tempered expectations of an interest rate cut.

Oil exporter Norway's currency hit a two-week high of 9.2090 crowns per euro, and the Canadian and New Zealand dollars , also commodity-dependent, climbed.

"The Aussie ...is pulling the other commodity currencies up," said RBC Capital Markets currency strategist Adam Cole in London. "The expectation was that the minutes of the RBA meeting would have set us up for another cut in June, and that was very much not the case."

The dollar index, which tracks the currency against a basket of six others, edged down 0.2 percent to 94.414, away from a three-week high of 94.845 hit on Friday.

The only major currencies to fall against the dollar were the euro and the yen, down 0.1 percent and 0.4 percent respectively as investors moved towards riskier assets across markets.

Japan will this weekend host a meeting of G7 finance leaders that could expose a rift on issues ranging from currency and fiscal policies, on which Japan is hoping for a coordinated policy response.

The major data focus on Tuesday is U.S. inflation due at 1230 GMT.

Fed funds futures rates show investors see only a 4 percent chance the U.S. Federal Reserve will raise interest rates at its June policy meeting, but many investors believe another hike will come later this year.

"From the Fed's perspective, so long as core CPI continues to hover above 2 percent, ongoing signs of a recovery in headline inflation will be seen as a hawkish development," wrote strategists from ING in London in a note to clients.

"With markets barely pricing in a near-term Fed rate ...we suspect that short-term U.S. rates may nudge higher ...though uncertainty over the Fed's willingness to allow for an inflation overshoot may limit any material upside."