The Australian dollar retreated on Tuesday during the Asian trading session, as data on retail sales hit the expectations, and the moderate rise in Chinese consumer prices offset concerns about the jump in producer prices.
In China, consumer prices rose in December by 0.2% (m/m) and 2.1% (y/y), while the expected growth was by 0.3% and 2.3% respectively. Producer prices jumped in December by 5.5% (y/y) instead of the expected 4.5%, the biggest gain in five years. In addition, the National Commission for Development and Reform of China, which is engaged in planning issues, said it expects a growth in 2016 to about 6.7%, remaining within the target corridor of 6.5% to 7%.
Earlier, Australia's retail sales rose in November by 0.2% on a monthly basis instead of the expected 0.4%.
AUD/USD was trading at 0.7369, gaining 0.19% as the exchange rate greatly depends on the situation in China, the largest trading partner of Australia.
USD/JPY was trading at 115.64, down 0.31%. GBP/USD fell 0.07% to 1.2152, after yesterday's sharp fall due to concerns related to the Brexit.
The US Dollar Index, showing the strength of the dollar against the trade-weighted basket of six major currencies, fell 0.26% to 101.66.
Yesterday, the dollar has fallen relative to other major currencies, and the pound sank sharply as markets worried that exit of the UK from the EU will be held on the hard scenario.
Demand for the USD continues to be supported by Friday's report on the US labor market conditions in December, which showed slowing growth in the number of employees, as well as the fastest wage growth in seven years. The report bolstered expectations about the increase in interest rates this year. In December, the Federal Reserve has raised rates and said it plans to increase them three more times in 2017.
Raising rates provide support for the dollar, increasing its attractiveness for investors, which focus on profitability.
Chairman of the Federal Reserve Bank of Boston, Eric Rosengren, called on Monday the US central bank to increase the pace of rate hikes, warning that inflation may exceed the target if it doesn’t happen.