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Markets Muted After Disappointing Chinese Data; Dollar Steady

Markets Muted After Disappointing Chinese Data; Dollar Steady

The US dollar was broadly steady in Monday’s Asian session but off Friday’s highs when it jumped to near one-month highs following better-than-expected data. Strong retail sales and consumer sentiment figures lifted the US currency on Friday as it reignited expectations that the Fed may need to raise rates as early as June.

The greenback rose above 109 yen to a two-week high but had eased to around 108.70 yen in Asian trading today as the Japanese currency benefited from increased risk aversion following disappointing data out of China over the weekend. The euro meanwhile firmed from 2½ week lows against the dollar when it fell below the 1.13 level to climb to around 1.1322 dollars in late Asian session.

The pound was also higher on Monday but remained near three-week lows against the dollar. Traders remain cautious after the Bank of England’s fresh warning last week on the possible risks to the British economy of a Brexit and ahead of a flurry UK data expected this week. Sterling was last trading at 1.4362 dollars.

Asian equities were mostly positive on Monday despite weak Chinese data raising concerns about the health of China’s economy. Industrial production in China rose by 6.0% year-on-year in April, missing estimates of 6.5% and down from 6.8% the prior month. Retail sales also disappointed as they came in at 10.1% year-on-year instead of the expected 10.5%, while business spending in urban areas eased to 10.5% instead of rising to 10.9%.

The Australian dollar, which often serves as a liquid proxy to China’s economy due to China being Australia’s largest export market, rebounded from fresh 2-month lows of 0.7245 at the start of Asian trading as worries about Chinese growth and lower iron ore prices weighed on the currency. However, the aussie soon reversed to climb to 0.7280 in late session, while the New Zealand dollar also recovered from its lows to advance to 0.6778 versus the greenback.

Crude oil prices bounced back on Monday as the dollar eased slightly and amid signs of ongoing disruptions to supply. US oil futures were once again testing $47 a barrel in late Asian session.

The rest of the day is looking relatively quiet as many markets are closed for the Whit Monday holiday. Investors will likely wait for tomorrow’s inflation data out of the UK and the US for further direction.

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