Dollar drops as commodity currencies gain on China optimism; euro rises on hot inflation

By Gertrude Chavez-Dreyfuss and Herbert Lash

NEW YORK (Reuters) – The U.S. dollar fell across the board on Wednesday, weighed down by firmer commodity currencies that benefited from China’s strong manufacturing activity data, as well as gains in the euro after German inflation soared last month and raised rate hike expectations in the euro zone.

Along with the Australian and New Zealand dollars, China’s yuan rose after data showed Chinese manufacturing activity expanded at its fastest pace in a decade, smashing expectations. The official manufacturing purchasing managers’ index (PMI) shot up to 52.6 last month from 50.1 in January.

China’s non-manufacturing activity also grew at a faster pace in February, and the Caixin/S&P Global manufacturing PMI reading for last month surpassed market expectations.

“The market is really responding to some of the other data outside the U.S.,” said Amo Sahota, executive…

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