# Dollar slips, yuan gains on China PMI; hot inflation lifts euro Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-01 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Euro Rises as German Inflation Surges, Boosting Rate Hike Meta Description: Discover how global markets responded to strong Chinese data and accelerated inflation in Germany, impacting currency movements and rate hike expectations. URL: https://financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-eurohtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-01t120921z1lynxmpej201furtroptp4global-dollar-1736814398169-compressed.jpg) By Herbert Lash and Samuel Indyk NEW YORK/LONDON (Reuters) -The U.S. dollar slid and China’s yuan gained on Wednesday after Chinese manufacturing activity expanded at its fastest pace in a decade, while the euro rose after German [inflation data surged last month and raised rate hike expectations](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected") in the euro zone. The Australian and New Zealand [dollars also gained on the robust Chinese data](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week"), which smashed expectations with the official manufacturing purchasing managers’ index (PMI) shooting up to 52.6 last month from 50.1 in January. China’s [non-manufacturing activity also grew at a faster pace in February, while the Caixin/S&P Global manufacturing PMI reading for last month](https://www.financedigest.com/spanish-manufacturing-output-down-for-6th-straight-month-in-dec-pmi.html "Spanish manufacturing output down for 6th straight month in Dec -PMI") likewise surpassed market expectations. The strong Chinese data [supports the recovery](https://www.financedigest.com/5-ways-the-fs-industry-can-support-the-recovery.html "5 ways the FS industry can support the recovery") story, the reopening story that seemed to wane a little bit last month and it’s underpinned risk assets,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. German consumer prices, harmonized to compare with other European Union countries, rose more than anticipated and pushed up European Central Bank [rate hike](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May") expectations after the data pointed to no let-up in stubborn cost pressures. Figures released on Tuesday showed accelerating inflation in France and Spain, two of the [euro zone’s](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") biggest economies. Germany, like France and Spain, reported [stronger than expected CPI data](https://www.financedigest.com/oil-slumps-on-economic-data-stronger-u-s-dollar.html "Oil slumps on economic data, stronger U.S. dollar") and this reinforces the idea of a shift in the market that the ECB rate peaks at 4%, about 50 basis points higher than at the start of the year,” Chandler said. The [euro gained](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") 0.63% to $1.0643 with a large option expiry on Friday at $1.07. Against a basket of currencies, the dollar index fell 0.295%, on pace to it’s [biggest single-day decline since](https://www.financedigest.com/dollar-retreats-headed-for-biggest-weekly-loss-since-mid-january-bitcoin-down.html "Dollar retreats, headed for biggest weekly loss since mid-January; bitcoin down") Feb. 1. The index rose nearly 3% in February, its first monthly gain after a four-month [losing streak](https://www.financedigest.com/european-shares-end-five-day-losing-streak-still-down-for-the-week.html "European shares end five-day losing streak, still down for the week"), 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](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike"). Futures pricing continues to [edge higher](https://www.financedigest.com/londons-ftse-100-edges-higher-set-for-fourth-weekly-gain.html "London’s FTSE 100 edges higher, set for fourth weekly gain"), with a peak rate climbing on Wednesday to 5.45% in the fed funds by September. We [see the Fed](https://www.financedigest.com/analysis-weary-investors-see-little-respite-to-fed-hike-gloom.html "Analysis-Weary investors see little respite to Fed hike gloom") going to 5.5%, with a growing risk of 6%,” said Michael Every, global strategist at Rabobank. The [Fed is hiking](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade"). Others can’t follow or match. The [dollar will soar.”](https://www.financedigest.com/analysis-g7-fails-to-reach-intervention-deal-to-ease-pain-of-soaring-dollar.html "Analysis-G7 fails to reach intervention deal to ease pain of soaring dollar") Elsewhere, the [Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") weakened 0.05% versus the dollar at 136.27 after the U.S. currency rose almost 5% against the yen in February, its [largest monthly gain since](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA") June. The onshore [yuan finished the domestic session at 6.8854 per dollar](https://www.financedigest.com/dollar-slips-while-yuan-slumps-on-covid-unrest-in-china.html "Dollar slips, while yuan slumps on COVID unrest in China"), the strongest close since Feb. 21, while the offshore yuan jumped 1.3% to 6.8683 per dollar, [set for its largest one-day gain](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") since late November. The kiwi surged 1.3% to $0.6263, while the Aussie gained 0.7% to $0.6774, reversing the slide to a two-month low earlier on Wednesday following [soft domestic economic data](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades"). The two [currencies are often used as liquid proxies for the yuan](https://www.financedigest.com/the-yuan-makes-its-official-entry-into-rawbanks-currency-basket.html "The yuan makes its official entry into RAWBANK’s currency basket"). Sterling traded at $1.1966, down 0.45% on the day, after Bank of [England](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") governor Andrew Bailey said it was possible the central bank had already come to the end of its rate-rising cycle. The pound surged 1% at the start of the week after Britain struck a post-Brexit Northern Ireland trade [deal with the European Union](https://www.financedigest.com/french-uber-drivers-to-earn-more-than-8-per-ride-after-union-deal.html "French Uber drivers to earn more than per ride after union deal"). (Reporting by Herbert Lash, additional reporting by Samuel Indyk and Rae Wee; Editing by Kim Coghill, Mark Potter and Alex Richardson) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---