The dollar rose after a report that Chinese leaders are considering allowing the Chinese yuan to retreat, as they prepare for higher tariffs under Donald Trump's second presidency.
The Chinese yuan in foreign transactions fell by about 0.5% to 7.2921 against the dollar before reducing the declines, after Reuters reported that policymakers are considering allowing the yuan to fall, and abandoning the current stable currency policy.
This move extended to all over the world, leading to the decline of other currencies such as the Australian dollar and the New Zealand dollar, as well as major emerging market currencies such as the South African rand.
The Bloomberg dollar index rose by 0.2% to reach the highest level in two weeks.
Chinese reports have rocked markets that were in a state of calm before the release of key US inflation data, which will give the Federal Reserve another look at price pressures ahead of next week's policy meeting.
Futures for the S&P 500 and Nasdaq 100 fluctuated, while the European Stox 600 index wiped an early decline.
Meantime, the depreciation of the yuan could help offset the weakness of Chinese exports and the contraction. The dollar was very strong anyway, in anticipation of tariffs, or just pricing some interest rate cuts that people thought the Fed would implement.
Apart from the US data, this week will be crucial in global policymaking, as the Bank of Canada is expected to lower interest rates later on Wednesday, while the European Central Bank and the Swiss National Bank are expected to do the same on Thursday.
At the same time, China's two-day Central Economic Work Conference is expected to outline policies for next year, with traders encouraged by stimulus signals from top leaders.
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