WASHINGTON, May 31 — The US dollar rose strongly today to a more than two-month high after data showed European inflation is cooling quicker than expected and China’s recovery is sputtering.
The euro fell to US$1.066 (RM4.90) earlier in the session, the lowest since March 20. It was last down 0.64 per cent to US$1.06665.
That helped the dollar index, which measures the greenback against six major peers, climb to 104.63, its highest since March 16.
It was last up 0.509 per cent at 104.570.
Data today showed inflation in France and some of Germany’s biggest states is cooling. Analysts said the figures reduced the pressure on the European Central Bank (ECB) to keep raising interest rates, diminishing the euro’s attractiveness relative to the dollar.
“It makes an ECB rate increase less likely with the weaker-than-expected inflation data in France, so definitely helps weaken the euro,” said Chris Gaffney, president of world markets at TIAA Bank.
Inflation in France cooled in May to its lowest level in a year as energy and food price increases moderated. Euro zone-wide inflation data is due out tomorrow.
“European inflation is rolling back now and you’re taking back some of the previously anticipated hikes from the ECB,” said Carl Hammer, chief strategist at European bank SEB.
Hammer also said the probable resolution of the US debt ceiling standoff was supporting US stocks and likely helping the dollar.
Weak economic data out of China also boosted the US currency, analysts said. A survey released today showed that China’s factory activity shrank faster than expected in May, in the latest sign that the country’s recovery from Covid-19 lockdowns is faltering. China’s yuan fell to its lowest since November, and was last down versus the greenback at 7.1304 per dollar.
“We’re seeing dollar strength after Chinese data came in weaker than expected. That was the main mover overnight,” said Gaffney.
“It gives investors a little something to worry about, if you will, about the global recovery and possibility that we’ll see the global economy slip into a recession.”
In a busy day in currency markets, the Japanese yen was last down 0.15 per cent versus the greenback at 140.00 per dollar.
The dollar rose to a six-month peak against the yen of 140.93 yesterday but then fell sharply after Japan’s top currency diplomat said officials “will closely watch currency market moves and respond appropriately as needed”.
Sterling was last trading at US$1.2368, down 0.36 per cent on the day. In cryptocurrencies, bitcoin last fell 2.89 per cent to US$26,905.00. Ethereum last fell 2.55 per cent to US$1,855.70. — Reuters
