LONDON, Jan 4 Reuters The dollar fell on Wednesday, losing out to commodities currencies like the Australian dollar and against the euro, which got a lift from a raft of data that suggested European inflation may finally have peaked.

The dollar was already under pressure from investors who have grown more optimistic over the prospect that China39;s relaxation of tough COVID restrictions will breathe life into the world39;s second largest economy.

Data on Wednesday showed French consumer price pressures cooled by a lot more than expected in December, while the previous day German data also showed inflation fell significantly more than forecast. Spanish inflation data last week painted a similar picture.

The euro, which on Tuesday posted its largest oneday drop against the dollar in two months, zipped up by as much as 0.82, as traders latched on to the idea that softer inflation might mean a change in pace from the European Central Bank ECB. This in turn might suggest the economy will take less of a knock.

A series of separate reports showed business sector activity across the euro zone held up better than expected in December, despite intense pressure from soaring energy prices.

We39;re a day and a half into the trading year, so we can39;t read too much into it, but the recent inflation figures in the euro zone are coming down more quickly than expected, TraderX market analyst Michael Brown said.

The ECB in December sounded an unusually hawkish note, indicating it…