The dollar fell to low levels on Wednesday after retreating overnight with the release of unexpectedly weak inflation data in the United States, bolstering bets that the Federal Reserve has reached the end of its monetary tightening cycle. At the same time, the Chinese yuan in offshore markets received some support after domestic industrial production and retail sales growth exceeded expectations. Rob Carnell, head of research for the Asia-Pacific region and chief economist at ING, stated that activity data generally appears to be "further evidence of very slow progress" in the Chinese economy. The yuan briefly rose to a three-month high at 7.2385 against the dollar before retreating slightly to 7.2477.
Meanwhile, dismal news continued to flow from the Chinese property sector, with official data showing sales dropping at a faster pace in October and a decline in investment. Carnell indicated that, with no end in sight for the problems in this sector, it is likely to spill over into other parts of the Chinese economy. The New Zealand dollar climbed to a one-month high at 0.6029 against the dollar. Intense selling of the dollar led to rises in several of its counterparts, with the euro remaining close to the highest level in over two months recorded on Tuesday.
The bustling activity in the currency market stemmed from data showing no change in U.S. consumer prices in October, with an annual increase in core inflation at its slowest pace in two years. The dollar index, which measures the currency's performance against a range of currencies, recently recorded 104.14, not far from the two-month low of 103.98 seen on Tuesday. With the dollar declining, the euro stabilized near 1.08725 dollars after hitting its highest levels since August the previous day. The British pound stood at 1.2489 dollars, approaching levels last seen in September. The drop in the U.S. currency overnight provided some support for the weak yen, which rose from a new yearly low of 151.92 reached on Monday. The dollar against the yen saw a slight uptick to 150.68 as data revealed a contraction in the Japanese economy.
