The dollar rebounds after weak data from the Chinese economy

The dollar rallied on Monday and commodity-sensitive currencies tumbled after a new series of disappointing Chinese data reinforced concerns about a global recession.

China’s industrial production, retail sales and fixed asset investment fell short of analyst estimates in data released on Monday, as the nascent recovery from COVID-19 lockdowns faltered.

The dollar index, which measures the performance of the greenback against six pairs, rose 0.45% to 106.15 units. The euro was down 0.55% against the dollar at $1.0200.

The dollar index has fallen from a 20-year high of 109.29 on July 14 on bets the Federal Reserve will slow its aggressive pace of rate hikes and that the worst of accelerating inflation may be behind it.

However, Fed policymakers maintained an aggressive tone, emphasizing that it is too early to declare victory over inflation.

All this had an impact on Latin American currencies, since China is one of its largest export markets for raw materials.

The Brazilian real fell 0.5% after three weeks of gains, while the Mexican peso lost 0.1% after posting five days of gains.

Most other Latin American markets were closed for holidays in various countries.

Charlie Lay, an analyst at Commerzbank, said consumer sentiment was likely to remain fragile amid uncertainty over the ups and downs and lockdowns in China.

In addition, the economy is still struggling with the property correction and investment weakness in general.

“The first impression from the activity data for July is that there are few signs of a strong rebound in the (Chinese) economy,” he explained.

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