August 15, 2022 03:12 AM ET
By: AnalysisWatch
The U.S. dollar edged higher in early European trading Monday, benefiting from its safe-haven status, while the Chinese yuan slipped after disappointing data from China prompted the country's central bank to cut interest rates.
At 03:10 AM ET, the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 105.750, in the middle of its recent trading range.
Economic data released Monday showed Chinese economic growth unexpectedly slowed in July as the world's second-largest economy struggled to shake off a second-quarter growth slump caused by tight COVID restrictions.
Industrial production grew 3.8% in July from a year earlier, below the 4.6% increase expected, while retail sales rose 2.7% from a year earlier, below forecasts of 5.0% growth and June's 3.1% gain.
Surprisingly, the People's Bank of China cut the interest rate on its one-year medium-term credit facility by 10 basis points to 2.75%, sending the USD/CNY up 0.3% to 6.7600.
In addition, the Australian and New Zealand dollars fell back from nearly two-month highs following weak data from China, a major trading partner. The AUD/USD fell 0.5% to 0.7084, while the NZD/USD fell 0.6% to 0.6411.
While the Chinese economy is slowing enough to prompt the central bank to cut interest rates, the debate in the U.S. centers on the extent to which the Federal Reserve will raise rates next.
U.S. inflation data came in weaker than expected last week, fueling investor hopes that the central bank might scale back its aggressive tightening, even as a number of Fed policymakers appeared to want to continue the hawkish rhetoric.
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