The U.S. dollar turned higher on Tuesday after another disappointing set of Chinese trade figures hurt the yuan, the Aussie and kiwi, while the yen also eased after Japanese real wages declined for a 15th straight month.
China’s imports and exports fell much faster than expected in July, data on Tuesday showed, with imports down 12.4% from a year earlier while exports contracted 14.5%, in another sign of the country’s faltering economic recovery and subdued global demand.
The offshore yuan fell to a 2-1/2 week low of 7.2334 per dollar, while its onshore counterpart similarly bottomed at a more than two-week low of 7.2223 per dollar.
The Aussie weakened 0.7% to $0.6522, while the kiwi slid 0.8% to $0.6059, its lowest level since June 29.
“China’s imports data is another sign of weak domestic demand,” said Adam Cole, chief currency strategist at RBC Capital Markets.
“Australia is the main G10 proxy so it’s certainly not helping the Aussie,” Cole added.
The U.S. dollar also firmed 0.4% against a weaker yen , last standing at 143.125 yen.
Data on Tuesday showed that Japanese real wages fell for a 15th straight month in June on relentless price hikes, but nominal pay growth remained robust amid rising salaries for high-income workers and a broadening labour crunch.
“The BoJ will feel more comfortable in its message on the need for continued easing with real wages remaining weak,” said Colin Asher, senior economist at Mizuho.
While currency moves had been minimal in the early Asian day, the greenback extended its gains over the course of the trading session and European morning as risk sentiment turned fragile and Asian stocks failed to ride Wall Street’s rally.
“It’s become a wave of U.S. dollar buying, for sure,” said Sean Callow, a senior currency strategist at Westpac.
“Perhaps the market was just expecting that there would be a more upbeat tone to risk appetite today, given U.S. equities rallied.”
Sterling edged 0.2% lower to $1.2757, while the euro was down 0.2% at $1.0978.
The common currency had slipped against the U.S. dollar in the previous session on news that German industrial production dropped more strongly than forecast in June.
The dollar index rose 0.3% to 102.36, edging away from Friday’s one-week low in the wake of a mixed U.S. jobs report which pointed to a cooling, but still resilient labour market.
That added to hopes of a soft-landing scenario in the world’s largest economy, in the face of the Federal Reserve’s aggressive rate hikes.
All eyes are now on Thursday’s inflation data, where expectations are for core consumer prices in the United States to have risen 4.8% on an annual basis in July.
“The risk is quite symmetric going into the data,” RBC Capital Markets’ Cole said.
“You could see material market reaction to either an upside or downside surprise as the data are clearly pivotal for sentiment ahead of the September and October Federal Reserve meetings,” Cole added.
