The dollar was already under pressure from investors who have grown more optimistic over the prospect that China’s relaxation of tough COVID restrictions will breathe life into the world’s second-largest economy.
The euro, which on Tuesday posted its largest one-day drop against the dollar in two months, zipped up by as much as 0.82%, as traders latched on to the idea that softer inflation might mean a change in pace from the European Central Bank. This in turn might also suggest the economy will take less of a knock.
“We’re a day and a half into the trading year, so we can’t read too much into it, but the recent inflation figures in the euro zone are coming down more quickly than expected,” TraderX market analyst Michael Brown said. Wednesday’s macro data has cast some doubt on this, Brown said. “That’s the big story markets are latching onto,” he said.The standout performer on Wednesday was the Australian dollar, which roared as much as 2.3% higher against its US counterpart, on a combination of optimism over China and following media reports that the Chinese government is discussing a possible removal of a ban on the country’s coal imports – a major Australian export.