The Australian and New Zealand dollars pulled back from near two-month highs against the U.S. dollar, reacting to disappointing economic data from China, one of their major trading partners.
Price Movement: New Zealand's kiwi fell to 1.5564 against the greenback, retreating from Friday's high of 1.5483, its strongest level since early June.
The Australian dollar retreated to 1.4085 against the U.S. dollar, sliding from the pair's recent high of 1.4015 reached last week, when it climbed to its highest since early June.
At the same time, the dollar index, a gauge that measures the strength of the greenback against a basket of currencies, was trading 0.8% higher at 105.71.
What Happened: A slew of data released by the China National Bureau Of Statistics on Monday showed softening in economic conditions. Industrial production grew by 3.8% year-over-year in July, slightly lower than the 3.9% figure in June. Retail sales rose 2.7% in July compared with the same period in 2021, below the 5% consensus estimate, reported CNBC.
China’s central bank unexpectedly slashed a key policy interest rate for the first time since January. The People’s Bank of China (PBOC) reportedly reduced the rate on its one-year policy loans by 10 basis points to 2.75% on Monday following which the onshore yuan fell to a one-week low of 6.7620 against the U.S. dollar.
Expert Take: Despite the warning of inflation risk and flush liquidity conditions, the dominant downside risks from the Covid spread and property-sector rout prompted the PBOC to cut rates to stimulate demand, Ken Cheung, chief Asian FX strategist at Mizuho Bank told Reuters.
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