Dollar bid on global growth fears after weak Chinese data

NEW YORK : The safe-haven dollar bounced on Monday while commodity sensitive currencies including the Australian dollar tumbled after a new batch of disappointing Chinese data bolstered global recession worries.

Chinese industrial output, retail sales and fixed-asset investment all fell short of analyst estimates in data published on Monday, as a nascent recovery from draconian COVID-19 lockdowns faltered.

"Bad data from China also weighs on recession worries for the rest of the world," said Ipek Ozkardeskaya, market strategist at Swissquote. That pushed down the euro against the greenback, she added.

The U.S. dollar index gained 0.45 per cent to 106.15. The euro eased 0.55 per cent against the dollar to $1.0200.

The Australian dollar, which is sensitive to commodity prices and viewed as a proxy for global growth, dropped 1.37 per cent to $0.7022.

The offshore yuan hit 6.7904, the weakest since Aug. 2, after China's central bank cut key lending rates in a surprise move to revive demand.

The dollar index has fallen from a 20-year high of 109.29 on July 14 on hopes that the Federal Reserve will slow its aggressive pace of rate increases and that the worst of inflation increases may be behind us.

Concerns that the Fed tightening will send the economy into recession has also helped to send U.S. Treasury yields lower.

However, Fed officials have maintained a hawkish tone and stressed that it is too soon to declare victory on inflation.

“The Fed is telling us they want to tighten financial conditions and the market has eased them, so the Fed is going to have to drive home its point with a larger rate hike,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, adding that he expects the U.S. central bank to raise rates by 75 basis points at its September meeting.

Data this week including industrial production on Tuesday and retail sales on Wednesday could also “help ease fears that the U.S. contracted again,” Chandler said, which would boost the greenback.

A New York state manufacturing survey on Monday showed a sharp decline in activity in August.

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Currency bid prices at 9:50AM (1350 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 106.1500 105.7000 +0.45 per cent 10.962 per cent +106.3400 +105.5400

Euro/Dollar $1.0200 $1.0257 -0.55 per cent -10.28 per cent +$1.0270 +$1.0186

Dollar/Yen 132.7200 133.6100 -0.67 per cent +15.29 per cent +133.5850 +132.5550

Euro/Yen 135.37 136.93 -1.14 per cent +3.88 per cent +137.0700 +135.2900

Dollar/Swiss 0.9437 0.9411 +0.16 per cent +3.33 per cent +0.9466 +0.9409

Sterling/Dollar $1.2082 $1.2135 -0.44 per cent -10.66 per cent +$1.2148 +$1.2051

Dollar/Canadian 1.2930 1.2773 +1.23 per cent +2.27 per cent +1.2934 +1.2774

Aussie/Dollar $0.7022 $0.7122 -1.37 per cent -3.37 per cent +$0.7125 +$0.7012

Euro/Swiss 0.9625 0.9653 -0.29 per cent -7.18 per cent +0.9663 +0.9618

Euro/Sterling 0.8441 0.8451 -0.12 per cent +0.49 per cent +0.8470 +0.8431

NZ $0.6368 $0.6456 -1.34 per cent -6.95 per cent +$0.6456 +$0.6357

Dollar/Dollar

Dollar/Norway 9.6965 9.5785 +1.06 per cent +9.88 per cent +9.7070 +9.6040

Euro/Norway 9.8939 9.8095 +0.86 per cent -1.19 per cent +9.9042 +9.8188

Dollar/Sweden 10.3088 10.1833 +0.53 per cent +14.31 per cent +10.3095 +10.1907

Euro/Sweden 10.5106 10.4550 +0.53 per cent +2.70 per cent +10.5176 +10.4644

(Additional reporting by Joice Alves in London; Editing by Kirsten Donovan)