China growth woes boost dollar, weigh down Aussie
By Kevin Buckland and Alun John
TOKYO/HONG KONG, Aug 16 (Reuters) - The safe-haven U.S. dollar hit a one-week high on Tuesday after weak global economic data, particularly in China, reignited global recession fears and weighed on risk-friendly currencies like the Australian dollar.
The dollar index =USD , which measures the greenback against six major peers, hit a peak of 106.81 in early European trading, regaining all its losses from last week when lower-than-expected U.S. inflation data sent investors out of the dollar and back towards risk-friendly assets.
The index was last up 0.12% at 106.6.
"The U.S. growth picture is still intact, but the overall global picture remains fragile, given concerns about China, and that has put a dampener on risk sentiment and hurt the Aussie and some emerging market risk currencies," said Sim Moh Siong, currency strategist at Bank of Singapore.
China's central bank on Monday unexpectedly cut a key interest rate to try to revive credit demand to support the COVID-hit economy after a string of weak economic data releases for July.
The Australian dollar AUD=D3 fell 0.44% to $0.699 on Tuesday, dipping back below the symbolic $0.7 level. Australia's close trade ties with China means its currency is sometimes treated by traders as a liquid proxy for China's yuan.
The U.S. dollar climbed as high as 6.84146 on the yuan traded offshore CNH=D3 , a level last seen in mid-May.
The move back to the safety of the dollar also hurt the euro EUR=EBS , which fell 0.18% to $1.0142, and sterling GBP= , which was last trading at $1.2026, down 0.23% on the day,
The dollar also firmed 0.3% against fellow safe-haven the Japanese yen JPY=EBS to 113.7 yen.
The dollar index fell as low as 104.63 last week for the first time since the end of June after sliding from a two-decade high at 109.29 in mid-July, as markets pared bets for continued aggressive Fed tightening amid signs of a cooling in the economy and inflation.
However in recent days, several Fed policymakers have spoken of the need for continued rate hikes.
"Fed officials have no choice but to sound tough in the face of a very, very tight labour market and far too high inflation," Kit Juckes, the head of FX strategy at Societe Generale, wrote in a research note.
"It's hard to build a compelling case to sell the dollar in that world."
World FX rates Link
Reporting by Kevin Buckland and Alun John; Editing by Shri
Navaratnam, Simon Cameron-Moore and Jan Harvey
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.