Sterling edged 0.12% higher to $1.2032, having
surged 1% at the start of the week after Britain struck a
post-Brexit Northern Ireland trade deal with the European Union.
British Prime Minister Rishi Sunak was in Northern Ireland
and then met with his own lawmakers on Tuesday to sell the new
deal.
Against a basket of currencies, the U.S. dollar index fell 0.07% to 104.91.
It had risen nearly 3% in February, its first monthly gain
after a four-month losing streak, as a slew of strong U.S.
economic data in recent weeks raised market expectations that
the Federal Reserve has further to go in hiking rates.
Futures pricing currently suggests a peak of around
5.4% in the Fed funds rate by September. "We see the Fed going to 5.5%, with a growing risk of 6%,"
said Michael Every, global strategist at Rabobank. "The Fed is
hiking. Others can't follow or match. The dollar will soar."
Elsewhere, the dollar rose 0.06% against the Japanese yen to 136.31, after having spiked close to 5% against the
yen in February, its largest monthly gain since last June.
The kiwi gained 0.17% to $0.6195.
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(Reporting by Rae Wee; Editing by Jacqueline Wong)
By Rae Wee
SINGAPORE, March 1 (Reuters) - The dollar wobbled on
Wednesday after China's manufacturing activity expanded at its
fastest pace since April 2012 and exceeded forecasts, sparking
some risk-on appetite that sent the safe-haven dollar lower.
The yuan and the Australian dollar got a leg up from the
upbeat Chinese economic data, which showed that the official
manufacturing purchasing managers' index (PMI) stood at 52.6
last month against 50.1 in January.
Similarly, China's non-manufacturing activity grew at a
faster pace in February, official data showed, while the
Caixin/S&P Global manufacturing PMI reading for last month
likewise surpassed market expectations.
The onshore yuan rose and was last roughly 0.1%
higher at 6.9250 per dollar, while the offshore yuan gained a larger 0.26% to 6.9371 per dollar.
"The strong set of China PMIs breathed some life into the
China reopening trade," said Christopher Wong, a currency
strategist at OCBC.
The Aussie , which slid to a two-month low earlier
on Wednesday following soft domestic economic data, also
reversed its losses following the Chinese surveys, and was last
0.07% higher at $0.6733.
The Australian dollar is often used as a liquid proxy for
the yuan.
Australia's economy grew at the weakest pace in a year last
quarter while the country's monthly consumer prices rose less
than expected in January, separate data showed on Wednesday,
which could make the case for a slower pace of rate hikes by the
Reserve Bank of Australia.
"I think market participants will pay a close look to the
January CPI indicator in order to gauge the near-term outlook
for RBA policy," said Carol Kong, a currency strategist at
Commonwealth Bank of Australia (CBA).
"But given what the RBA said at the last meeting, they seem
to have already made up their minds and want to further raise
interest rates."
Across the board, the U.S. dollar edged lower on Wednesday
as markets cheered the revival of activity in the world's
second-largest economy following China's exit from its stringent
COVID policies late last year.
That raised hopes of a more subdued downturn in the global
economy in the wake of aggressive interest rate hikes by major
central banks.
The euro rose 0.09% to $1.0586, recouping some of
its losses from the previous session.
Inflation in two of the euro zone's biggest economies rose
unexpectedly in February, data showed on Tuesday, pushing up
rate hike expectations by the European Central Bank (ECB). "While still-high U.S. inflation augurs more Fed tightening,
euro area inflation is higher and stickier in 2023, and the ECB
has more tightening to do than the Fed," said Thierry Wizman,
Macquarie's global FX and rates strategist.
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