The U.S. dollar firmed across the board on Tuesday, garnering safe-haven bids, after a disappointing set of Chinese trade figures hurt the yuan and the Australian and New Zealand currencies, with European risk-sensitive currencies also sliding on the worsening global outlook.
The dollar index rose 0.5% to 102.55, moving further away from Friday's one-week low in the wake of a mixed U.S. jobs report, which pointed to a cooling but still resilient labor market. The greenback was on track for its best daily gain in about two weeks.
China's imports and exports fell much faster than expected in July, data on Tuesday showed, with imports down 12.4% from a year earlier while exports contracted by 14.5%, in another sign of the country's faltering economic recovery and subdued global demand.
"There's an element of risk aversion. Pretty clearly, the data overnight was not so good, with very sluggish export data across Asia," said Brad Bechtel, global head of foreign exchange, at Jefferies in New York.
"We're definitely at a place in the dollar smile where U.S. fundamentals are outperforming the rest of the world. And generally it's an environment for the dollar to sustain its rally," he added.
The offshore yuan fell to a five-week low of 7.2514 per dollar. Its onshore counterpart hit a three-week low of 7.2225 per dollar.
The Aussie, a proxy for risk-sensitive currencies that is directly impacted by the yuan, weakened to against the U.S. currency and reached lowest since June 1. The New Zealand dollar dropped to US $0.6035, reaching its weakest level in two months.
While currency moves had been minimal early in the Asian day, the greenback extended its gains in Europe and North America, as risk sentiment turned fragile and Wall Street shares sold off.
In other currencies, sterling fell 0.5% to $1.2718, after a survey showed British retailers in July logged their slowest sales growth in 11 months.
The euro dropped 0.44% to $1.0954, while the risk-sensitive Swedish and Norwegian crowns both tumbled against the dollar.
"Both SEK and NOK have had some good sessions, when they were supported by positive risk sentiment, but are for the opposite reason slightly on the defensive," said Jens Nærvig Pedersen, director at Danske Bank.
The U.S. dollar rose 0.6% to 143.34 yen.
Data on Tuesday showed that Japanese real wages fell for a 15th straight month in June on relentless price hikes, but nominal pay growth remained robust amid rising salaries for high-income workers and a broadening labor crunch.
All eyes are now on Thursday's U.S. inflation data, where expectations are for core consumer prices in the United States to have risen 4.8% on an annual basis in July.
China will report July inflation as well on Wednesday, with traders on the lookout for further signs of deflation.