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Forex – Dollar Drops; Aussie Firmer On China Data

The dollar dropped slightly against the other major currencies on Tuesday morning

Investing.com – The dollar dropped slightly against the other major currencies on Tuesday morning in Asia. China’s industrial data was in focus as its positive reading supported the Aussie.

The U.S. dollar index that tracks the greenback against a basket of six major currencies last stood at 92.52, down 0.03% at 11:01AM ET (03:01 GMT).

Despite the drop in early morning in Asia, the dollar was firmer overnight as it was supported by U.S. 10-Year yields that climbed up to 3% again this year. Markets will also watch the trade war headlines closely to look for cues, as U.S. President Donald Trump is said to be working with his Chinese counterpart to reverse a sanction on Chinese telecom company ZTE (HK:0763).

The USD/JPY pair added 0.08% at 109.75. Japan will release its GDP on Wednesday and CPI data on Friday, which is expected to drive the movement of the yen.

In China, the People's Bank of China set the set the reference rate for the yuan against the dollar, the mid-point from which the currency is allowed to trade, at 6.3486 versus the previous day's 6.3345. The USD/CNY pair gained 0.12% to trade at 6.3471.

China released its industrial production data on Tuesday morning which came in better than expected, 7% versus the estimated 6.4%. The data measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. An increase is regarded as inflationary that can translate into tightening monetary policy, making sentiment positive for the yuan and the Aussie.

The AUD/USD pair added 0.04% at 0.7530. The Aussie was supported by the bullish Chinese data. As China is Australia’s largest trading partner, its data can be a directional driver for the sentiment-linked Aussie.

Meanwhile, the Reserve Bank of Australia released its meeting minutes, citing there was not a "strong case" for a near-term adjustment in monetary policy. The Bank has been holding on its dovish stance to keep rates at 1.5% since August 2016.

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