Dollar holds ground against major peers as disappointing economic data

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LONDON, Aug 16 - The dollar held its ground against major peers on Monday as disappointing monthly activity data from China helped the greenback claw back some losses after a shocking slump in consumer sentiment on Friday weakened the U.S. unit.

Against a basket of other currencies, the Greenback broadly stabilized with 92.53 after dropping to a one week low of 92.468 on Friday. Its gains were the most pronounced against the Australian Dollar and the Chinese Yuan, against which it advanced 0.1% and 0.5% respectively.

July retail sales, industrial production and fixed asset investment all were weaker than expected as the latest COVID-19 outbreak weighed on the second biggest economy of the world.

Long positions on the greenback have swelled to their largest levels since March 2020, suggesting the move lower was more a structural setback than the beginning of a temporary downtrend.

The release of the Fed minutes this week will be key to the short-term outlook for the greenback especially if it confirms more policymakers are leaning towards tapering its bond purchase plan by the end of the year.

MUFG strategists noted there has been a clear pattern for the U.S. dollar to increase modestly after the release of Fed minutes, but there is the risk of a bigger market reaction when the Fed's policy is moving closer to a pivot point.

It poses the main event risk of disrupting the quiet period of trading that we have seen over summer, they said.

Currency market volatility, even though it is already low, is near 2021 lows thanks to summer lull.

Elsewhere, minutes of the latest Reserve Bank of Australia meeting are due on Tuesday.

The kiwi dollar was 0.21% weaker at $0.70235 ahead of the Reserve Bank of New Zealand policy meeting on Wednesday. At which economists frequently expect the first hike in benchmark interest rate since 2014.

In cryptocurrencies, bitcoin edged above $47,500 mark making the three-month high of $48,190 marked over the weekend.