The US dollar wobbled near a 3 1/2-week low against a basket of currencies on Wednesday as further signs of weakness in China fanned expectations that the US Federal Reserve will have to wait longer before any policy tightening.
The Australian dollar slid further from two-month highs as a relief rally in various commodities and risk assets appeared to be running out of steam.
“It seems the rally in risk assets is over after investors covered their short positions. I suspect share markets will not have an easy time for now as investors look to earnings, so the dollar is likely to be capped as well,’’ said a trader at a major Japanese bank.
China’s price data showed annual consumer inflation slowed more than expected to 1.6 per cent in September, below market expectation of 1.8 per cent from 2.0 per cent in August.
The inflation number, coming a day after data showed Chinese imports fell 20 per cent in September, suggested the economic picture in China is still cloudy, likely constraining the Fed’s ability to raise interest rates.
Dollar index
The dollar index stood at 94.692, just above Tuesday’s low of 94.539, which was its lowest since September 18.
Against the yen, the dollar dipped 0.1 per cent on Wednesday to 119.61 yen, near Tuesday’s low of 119.55, its lowest level since October 2. But the Japanese currency was hampered by expectations that the Bank of Japan could unleash stimulus at the end of this month.
The euro on Tuesday rose to $1.1411, its highest in 3 1/2 weeks, and last stood at $1.1394, with its September 18 high of $1.1460 seen as a possible target.
The US dollar’s weakness against other major currencies has not been helped by the latest comments from Fed officials.
Fed Governor Daniel Tarullo told CNBC television he does not expect the economy to be ready for a rate hike this year, while St. Louis Fed President James Bullard said an October rate rise is unlikely.
Australian dollar
The Australian dollar slipped 0.3 per cent to $0.7211, taking it further away from Monday’s two-month peak of $0.7382.
Against the New Zealand dollar, it fell 0.7 per cent to a four-month low of NZ$1.0811 as the kiwi rose after markets digested comments from New Zealand’s central bank chief Graeme Wheeler.
Although Wheeler highlighted concerns on China’s economic outlook, he made no fresh effort to talk down the kiwi while there was mention of the risk low interest rates can bring.
Against the US dollar, the kiwi rose 0.4 per cent to $0.6670.
The Singapore dollar also rose 0.5 per cent to around 1.3950 to the US dollar after the country’s central bank eased its monetary policy only slightly, less than some players had expected.
Euro zone industrial output, US retail sales
The markets will be looking to more data from Europe and the United States later in the day, including euro zone industrial output and US retail sales.
The UK will report the August jobless rate, a day after sterling lost momentum on a surprise fall in British consumer prices last month, which further reduced expectations of a rate hike by the Bank of England.
The pound stood at $1.5277, down from a three-week high of $1.5388 hit earlier on Tuesday.
The pound fell to an eight-month low of 74.93 pence per euro on Tuesday. It last stood at 74.62.