WASHINGTON: The US dollar rose strongly on Wednesday to a more than two-month high after data showed European inflation is cooling quicker than expected and China’s recovery is sputtering.

The euro fell to $1.066 earlier in the session, the lowest since March 20. It was last down 0.64% to $1.06665.

That helped the dollar index, which measures the greenback against six major peers, climb to 104.63, its highest since March 16. It was last up 0.509% at 104.570.

Data on Wednesday showed inflation in France and some of Germany’s biggest states is cooling. Analysts said the figures reduced the pressure on the European Central Bank (ECB) to keep raising interest rates, diminishing the euro’s attractiveness relative to the dollar.

“It makes an ECB rate increase less likely with the weaker-than-expected inflation data in France, so definitely helps weaken the euro,” said Chris Gaffney, president of world markets at TIAA Bank.

Weak economic data out of China also boosted the US currency, analysts said. A survey released on Wednesday showed that China’s factory activity shrank faster than expected in May, in the latest sign that the country’s recovery from COVID-19 lockdowns is faltering.

China’s yuan fell to its lowest since November, and was last down versus the greenback at 7.1304 per dollar.

The dollar rose to a six-month peak against the yen of 140.93 on Tuesday but then fell sharply after Japan’s top currency diplomat said officials “will closely watch currency market moves and respond appropriately as needed”.

Sterling was last trading at $1.2368, down 0.36% on the day.

In cryptocurrencies, bitcoin last fell 2.89% to $26,905.00. Ethereum last fell 2.55% to $1,855.70.