A buoyant dollar pushed the yen to a 10-month trough on Thursday and kept the euro and sterling pinned near three-month lows, as investors placed their faith in a still-resilient U.S. economy even amid a dour global growth outlook.
A lower-than-expected fall in China's exports and imports numbers in August did little to lift investors' spirits, as they remain on the lookout for further support measures from Beijing to shore up the economy and revive market confidence.
The greenback scaled a fresh top of 147.875 yen JPY=EBS in early Asia trade, its highest since last November.
Against a basket of currencies, the dollar rose 0.05% to 104.91, holding on to some of its gains from the previous session after scaling a six-month peak as the U.S. services sector unexpectedly gained steam in August.
The euro EUR=EBS was last 0.09% lower at $1.0718, after having fallen to its lowest since June on Wednesday. Sterling GBP=D3 slipped 0.06% to $1.2500, having also bottomed at a three-month trough in the previous session.
Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia, said the Institute for Supply Management's U.S. non-manufacturing PMI reading was positive.
"Those thinking of a (U.S.) recession in the near term might be a little bit disappointed," he said. "However, the Beige Book ... wasn't that great, actually."
U.S. economic growth was "modest" in recent weeks, job growth was "subdued," and inflation slowed in most parts of the country, the Federal Reserve report known as the "Beige Book" published on Wednesday showed.
"I think that what's really driving the dollar is not so much that the U.S. economy is doing great, but it's doing better than elsewhere," Capurso said.
Market pricing shows a more than 40% chance that the Fed will deliver another rate hike in November, according to the CME FedWatch tool, though expectations are for policymakers to keep rates on hold later this month.
Conversely, Bank of England (BoE) Governor Andrew Bailey said on Wednesday that the central bank was "much nearer" to the end of its rate-hike cycle, though borrowing costs might still have further to rise because of stubborn inflation pressures.
On the same day, European Central Bank (ECB) policymakers warned investors that the decision for a rate increase next week was still up in the air, but a rise in borrowing costs was among the options on the table.
"It was surprising to see those dovish comments from Governor Bailey ... that certainly does make us comfortable that they're only going to hike twice more," Capurso said, referring to the BoE.
"As for the ECB, what we're noticing is that there's a real divergence happening between various ECB members, and that to me is suggesting that at most you get one more rate hike out of the ECB."
ASIA DANGER? China's exports in August fell 8.8% from a year earlier, while imports contracted 7.3%, data showed on Thursday, coming in slightly better than economists' forecasts for a 9.2% and 9.0% drop, respectively.
That did little to help the Australian dollar AUD=D3 , which was still down 0.2% at $0.6370, while the New Zealand dollar NZD=D3 last bought $0.5871, with both languishing near their recent 10-month lows.
The two antipodean currencies are often used as liquid proxies for the Chinese yuan.
The onshore yuan CNY=CFXS slid to a fresh 10-month low of 7.3252 per dollar.
"I think we're all fatigued over the weak China-data theme," said Matt Simpson, senior market analyst at City Index.
"Trade data was expected to come in relatively soft, and whilst it surpassed expectations, we're going to need to see a much stronger beat to get markets out of their rocking chairs."
In Japan, traders continued to be on intervention watch as a fragile yen struggled to make headway against a resilient dollar, even as officials stepped up their warnings against a sell-off in the currency.
The yen JPY=EBS last bought 147.66 per dollar.
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