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By Karen Brettell
NEW YORK (Reuters) -The U.S. dollar weakened on Tuesday after China cut interest rates in a bid to prop up its struggling property market, raising hopes of additional stimulus that would boost global growth.
The yen gained, meanwhile, but stayed below the 150.88 per dollar level reached last Monday, its weakest in 11 weeks, as investors focus on whether renewed weakness in the Japanese currency is likely to prompt intervention by the Bank of Japan and Ministry of Finance.
China cut the five-year loan prime rate (LPR) by 25 basis points, which was the largest since the reference rate was introduced in 2019 and far more than analysts had expected.
“The thinking is if China hits the gas pedal then global growth will pick up. Then you start to see dollar selling and money going into emerging markets on the back of that,” said Adam Button, chief currency analyst at ForexLive in Toronto.
Bloomberg News on Sunday quoted Chinese Premier Li Qiang calling for "pragmatic and forceful" action to increase China's confidence in the economy.
The Australian dollar, which is seen as a proxy for global growth, rose 0.20% to $0.6550, after earlier reaching $0.6579, the highest since Feb. 2.
In the offshore market, the yuan strengthened as far as 7.1963 per dollar, the strongest since Feb. 7.
Investors are also brushing off higher than expected U.S. consumer and producer price inflation data for January released last week as likely being impacted by seasonal adjustments and not indicating renewed price pressures. That would leave the Federal Reserve on track to begin cutting interest rates in the coming months.
“There’s a lingering feeling that the CPI numbers were more of a seasonal adjustment story than a resurgence in inflation story," Button said. "If central banks wait until inflation is dead and buried then we might end up in a situation where risk assets struggle and global growth is crippled."
The Fed on Wednesday will release minutes from its Jan. 30 to 31 meeting, which will be evaluated for any new clues on when the U.S. central bank is likely to begin cutting rates.
The dollar index was last down 0.21% at 104.08, and earlier reached 103.79, the lowest since Feb. 2. The euro rose 0.25% to $1.0804 and got as high as $1.0839, the highest since Feb. 2.
The greenback fell 0.05% to 150.04 Japanese yen, after earlier trading at 150.45.
The yen has lost 7% in value in 2024 alone, having weakened past the 150-level against the dollar on Feb. 13. In the past, traders have viewed 150 as a line in the sand for the Bank of Japan and the Ministry of Finance that could trigger intervention, as was the case in late 2022.