©Reuters.
Investing.com — The dollar firmed while most Asian currencies fell on Tuesday as markets sank ahead of key U.S. inflation data that is widely expected to be factored into interest rate movements.
The inflation figures came after a chorus of Federal Reserve officials warned that the central bank was in no hurry to start cutting interest rates in 2024, a trend that bodes well for the dollar. But it bodes badly for risky, high-yield currencies.
Trading volumes in Asia were weak due to a week-long trading holiday in China and Hong Kong. However, there was a slight decline in offshore trading.
The Japanese yen approaches the 150 yen level under instructions from the dovish Bank of Japan.
It was one of the worst-performing regional currencies in recent trading, dropping 0.1% on Tuesday to trade at 149.53 yen. This is the lowest level in almost three months, and it will soon break above the 150 yen level, which portends a further decline in the yen.
The yen’s decline occurred mainly after Bank of Japan executives signaled that they were unlikely to do so aggressively, if at all, this year. This scenario offers little relief for the yen, which has been under pressure primarily from the widening gap between domestic and U.S. interest rates, a trend exacerbated by the prospect of higher U.S. interest rates for an extended period of time.
Economic data released this Friday is expected to show limited improvement in growth after an unexpected contraction in the third quarter.
A wide range of Asian currencies were trending lower. The stock fell 0.3%, trading near its lowest level in three months. Australia’s economy rebounded to a 10-month high in early February amid growing optimism about easing inflation and halting interest rate hikes, according to a private survey.
was flat, but the rate of decline was 0.1%.
Monday’s data showed India’s (CPI) inflation slowed as expected in January, but remained well above the Reserve Bank of India’s annual target of 4%.
Dollar rises slightly, CPI data waits for clues on rate cut
In Asian trade, and rose 0.1% each, with three-month highs still in sight as traders focused on interest rate cuts later this year.
Inflation is expected to ease in January, but remains well above the Fed’s annual target of 2%, leaving little incentive for the bank to start cutting rates early.
The dollar had soared in late January as traders began to sharply scale back expectations that the Fed would start cutting interest rates in March and May. It showed that only 45.4% of the market is pricing in the possibility of a 25 basis point rate cut in June.
