He dollar rose sharply on Wednesday, reaching highs in more than two months, after data showed that European inflation is cooling faster than expected and that the Chinese recovery is faltering. The euro was trading at its lowest level since March 20, shedding 0.64%, at $1.06665.
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For its part, the dollar index, which compares the greenback with a basket of six leading currencies, rose to 104.63 units, its highest level since March 16. In its last price it improved by 0.509%, to 104,570 units.
Data released Wednesday showed that inflation in France and some of Germany’s largest states is slowing rapidly. According to analysts, these figures reduce the pressure on the European Central Bank (ECB) to continue raising interest rates, which diminishes the attractiveness of the euro against the dollar.
*”European inflation is receding and some earlier ECB bets for increases are being withdrawn,” said Carl Hammer of European bank SEB. He also indicated that the likely resolution of the US debt ceiling deadlock was supporting stocks on Wall Street and likely helping the dollar.
The yuan falls to its lowest level since November
* Weak Chinese economic data also boosted the US currency, analysts said. A survey released on Wednesday showed Chinese factory activity contracted faster than expected in May, in the latest sign the country’s recovery is faltering after the COVID-19 lockdowns. The yuan fell to its lowest level since November and later declined to 7.1304 per dollar.
On a busy day in currency markets, the yen was down 0.15% at 140 to the dollar and sterling was down 0.36% at $1.2368.
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