On Monday, the New Zealand and Australian dollars came down from almost two-month highs, after a new batch of data from their key trading partner China turned out to be disappointing.

Meanwhile, a surprise cut in the lending rate by the Chinese central bank saw the yuan weaken.

US dollar rises

There was a rise in the US dollar, as traders were keeping an eye on the hawkish comments from policymakers of the Federal Reserve, against signs that inflation in the country may have peaked.

There was a 0.04% rise recorded in the US dollar index, which measures the performance of the currency against six of its major peers.

The index reached 105.74, which saw it consolidate close to the middle of its range in August. There was a decline in the onshore yuan against the US dollar.

The currency came down to a one-week low of 6.7620, as opposed to its previous closing value of 6.7430.

This was after the announcement of the People’s Bank of China of reducing its lending costs on medium-term policy loans.

This is the second time this year that the Chinese central bank has made use of this short-term liquidity tool.

Aussie and Kiwi

There was a 0.6% drop in the New Zealand dollar, which saw it come down to $0.64165, dragging it away from the high of $0.6468 it had reached on Friday, which was its strongest since June 8th.

A 0.58% fall was seen in the Australian dollar, which brought it down to $0.70805, pulling it further away from its recent peak of $0.7136 that it had reached last Thursday, its strongest level since June 10th.

On Monday, Chinese retail sales, industrial output as well as a fixed-asset investment all declined below the estimates of analysts.

This saw a faltering in the nascent recovery in the country’s economy from the draconian lockdowns imposed due to COVID-19.

Market analysts said that even though there were warnings of flush liquidity conditions and inflation risks, the PBOC chose to cut rates for stimulating demand.

This was because of the downside risks associated with the rout in the country’s property sector and the COVID spread, which remained dominant.

US data

Friday saw US data disclose the first decline in the prices of imports in seven months. Earlier in the week, statistics had shown a cooling in producer and consumer prices.

This has given rise to investors’ hopes that the US Fed might slow down its aggressive tightening, despite the hawkish stance of Thomas Barkin, the President of Richmond Fed.

On Friday, he told CNBC that they would only stop hiking rates after inflation reaches the 2% target of the Fed and stays there for some time.

The minutes of the latest rate-setting meeting of the Fed are due on Wednesday. Investors would scrutinize them for more clues about the thinking of the policymakers.

Retail sales data is also due on Friday and it will give further insight into the health of the US economy.