Data from China suspended growth of dollar
2023.03.01 04:35
Data from China suspended growth of dollar
By Ray Johnson
Budrigannews.com – After China’s manufacturing activity expanded at its fastest rate since April 2012 and exceeded forecasts on Wednesday, traders moved away from the safe-haven dollar and toward riskier assets with renewed optimism.
The robust Chinese economic data, which defied expectations with the official manufacturing purchasing managers’ index (PMI) rising to 52.6 from 50.1 in January, benefited the yuan and the dollars of Australia and New Zealand the most.
The Caixin/S&P Global manufacturing PMI reading for February also exceeded market expectations, and China’s non-manufacturing activity grew at a faster rate in February.
The was last up about 0.4 percent at 6.9040 per dollar, and the was up more than 0.6 percent to 6.9143 per dollar.
Christopher Wong, a currency strategist at OCBC, stated, “The strong set of China PMIs breathed some life into the China reopening trade.”
After falling to a two-month low earlier on Wednesday due to weak domestic economic data, the gained 0.52 percent to $0.62165 and 0.33 percent to $0.6749, respectively.
The currencies of the Antipodes are frequently used as liquid alternatives to the yuan.
Separate data released on Wednesday indicated that Australia’s economy grew at the slowest rate in a year last quarter and that the country’s monthly consumer prices rose less than anticipated in January, supporting a slower rate hike pace by the Reserve Bank of Australia.
According to currency strategist Carol Kong at Commonwealth Bank of Australia (OTC:), “I think market participants will pay a close look to the January CPI indicator in order to gauge the near-term outlook for RBA policy” () CBA).
“However, based on what the RBA said at the most recent meeting, they appear to have already decided and want to raise interest rates further,”
On Wednesday, markets cheered the revival of activity in the world’s second-largest economy following China’s exit from its stringent COVID policies late last year. As a result, the U.S. dollar edged lower across the board.
After major central banks’ aggressive interest rate hikes, that rekindled some optimism for China’s reopening of trade and raised hopes for a more moderate global recession.
The euro recovered some of its losses from the previous session by climbing 0.14 percent to $1.0591.
Tuesday’s data showed that inflation in two of the biggest economies in the euro zone unexpectedly rose in February. This raised expectations for the European Central Bank (ECB) to raise interest rates.
According to Thierry Wizman, a global FX and rates strategist at Macquarie, “while still-high U.S. inflation augurs more Fed tightening, euro area inflation is higher and stickier in 2023, and the ECB has more tightening to do than the Fed.”
After gaining 1% at the beginning of the week as a result of Britain concluding a post-Brexit Northern Ireland trade agreement with the European Union, sterling gained 0.22 percent to $1.2045.
Rishi Sunak, the British prime minister, visited Northern Ireland on Tuesday and then met with his own lawmakers to promote the new agreement.
After a four-month losing streak, the index had gained nearly 3% in February, marking its first monthly gain in four months. Market expectations that the Federal Reserve will continue to raise interest rates were raised by a slew of positive U.S. economic data in recent weeks.
The Fed funds rate is expected to reach a peak of around 5.4 percent by September, according to futures pricing.
Michael Every, a global strategist at Rabobank, stated, “We see the Fed going to 5.5%, with a growing risk of 6%.” The Federal Reserve is raising interest rates. Others cannot match or follow. The dollar will skyrocket.”
In other areas, the dollar gained 0.15 percent against the Japanese yen, reaching 136.41. In February, the currency’s gain against the yen was its largest monthly gain since June.
