USD is falling as inflation slows in Europe

The dollar fell on Wednesday against commodity-linked currencies such as the Australian dollar and against the euro, which was supported by a batch of data indicating that European inflation may have run its course.

The dollar was already under pressure from investors who were increasingly optimistic that China’s easing of strict Covid restrictions would lead to a recovery in the world’s second largest economy.

Data on Wednesday showed consumer price pressures in France eased more than expected in December, while data on Tuesday indicated that inflation in Germany fell much more than expected. Spanish data last week painted a similar picture.

The euro, which on Tuesday recorded its biggest one-day drop against the dollar in two months, rose 0.82 percent as traders stuck to the idea that falling inflation could mean a change in the pace of interest rate increases by the European Central Bank.

In the latest trading, the euro rose 0.5 percent against the dollar to 1.0603 dollars, while it rose 0.3 percent against the yen to 138.55 yen.

The Australian dollar was the best performer on Wednesday, last rising 2 percent to $0.6864, on track for its biggest daily gain in nearly two months. The New Zealand dollar rose 1.1 percent to $0.6315.

The yuan in foreign transactions rose 0.3 percent, recording about 130.66 yuan per dollar, while the pound sterling rose 0.7 percent to 1.2056 dollars.