The dollar has surged in response to the release of disappointing Chinese economic indicators, which have fueled worries about global growth. This development has sparked demand for the safe-haven US dollar.
Ahead of the publication of the Chinese economic data, the People’s Bank of China (PBoC) made a surprising move by opting to reduce key interest rates for the second time in a span of three months.
Analysts at ING noted, “The market was anticipating the PBoC to delay further easing until September, and today’s rate cuts suggest that concerns regarding the macroeconomy are intensifying.”
These concerns are warranted, considering that industrial output for July expanded by 3.7% compared to the previous year, marking a slowdown from June’s pace of 4.4%. Additionally, July’s retail sales increased by 2.5%, a decrease from the 3.1% rise observed in the preceding month. These figures amplify worries about the recovery of the world’s second-largest economy following the pandemic.
In the midst of volatile trading, the USD/CNY currency pair experienced a 0.4% decline, reaching 7.2336. Earlier, it had surged as high as 7.3115, marking its first time reaching such levels since November 4. Notably, major state-owned banks reportedly engaged in selling dollars to lend support to the Chinese currency.
