The US dollar rallied on Monday while commodity-sensitive currencies including the Australian dollar fell after the latest disappointing Chinese data raised fears of a global recession.
China's industrial output, retail sales and fixed-asset investment all fell short of analysts' estimates when they were published on Monday amid hopes of a fresh recovery as the Covid-19 lockdown begins to reopen.
Weak data from China has had an impact on recession fears for the rest of the world as observed by Ipek Ozkardeskaya, market strategist at Swissquote. This has pushed the Euro currency down 0.66% to a trading level of 1.0191.
The US dollar index strengthened 0.57% to trade at 106.120. The Australian dollar, which is sensitive to commodity prices and seen as a proxy for global growth, slipped 1.37% to $0.7022.
The yuan hit 6.7904, its weakest since August 2, after China's central bank cut key lending rates, a surprise move to revive demand.
The dollar index has fallen from a 20-year high of 109.29 on July 14 on hopes that the Federal Reserve will slow the pace of aggressive rate hikes and rising inflation.
Concerns that Fed tightening will push the economy into recession have also helped lower U.S. Treasury yields.
However, Fed officials have maintained a hawkish tone and insisted that it is too early to declare victory over inflation.
According to Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, he expects the U.S. central bank to will raise rates by 75 basis points at its September meeting.
This week's data including industrial production on Tuesday and retail sales on Wednesday could also "help ease concerns that the U.S. economy will contract again.
