Dollar falls in Asia, cooling US inflation lifts expectations of Fed break

The easiest way to express a negative view of the dollar is with the euro

SINGAPORE ( – The US dollar languished near a two-month low against its peers in early Asia on Friday morning, while the euro neared a one-year top, as traders raised expectations of an imminent end to the Federal Reserve’s interest rate hike cycle following signs -a sign of reduced inflation.

Data from the US Department of Labor on Thursday (13/4/2023) showed the producer price index (PPI) fell the most in almost three years last month, coming a day after inflation data showed a moderation in consumer prices.

greenback fell again after Thursday’s data release, with the dollar index dropping to a two-month low of 100.84 in the previous session. The index last stood at 100.95 in early Asian trade, and is headed for a weekly loss of more than 1.0 percent, its sharpest since January.

Meanwhile, the euro rose 0.07 percent to $1.1055, after soaring to a one-year peak of $1.1068 on Thursday (13/4/2023).

The British pound was also hovering near a 10-month high and was last buying $1.2526.

“The easiest way to express a negative view of the dollar is with the euro,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank.

“The surprise significant drop in US PPI has made people a little more convinced on the view that the Fed will be (soon) done… and (reinforced) confidence that inflation will allow the Fed to cut interest rates before the end of the year,” Attrill said.

Money markets are pricing in a 69 percent chance the Fed will raise rates by 25 basis points next month, although a series of cuts are also expected from July through the end of the year, with rates expected to be just above 4.3 percent in December.

Adding to hopes that global inflation pressures are easing was an unexpected spike in Chinese exports, which in March jumped 14.8 percent from the same month a year earlier, surprising economists who had forecast a 7.0 percent drop in a Reuters poll.

Upbeat Chinese data, alongside a strong March employment report in Australia, left the Australian dollar supported around US$0.6788 on Friday, after surging 1.3 per cent in the previous session on the back of the data release. The Australian and New Zealand dollars are often used as liquid proxies for the Chinese yuan.

“It was almost like a perfect positive storm for the Aussie,” said Attrill. “Starting with the jobs numbers… and the China trade numbers which are looking very good.”

“You layer it on, the dollar weakness from last night’s data and the positive risk sentiment, and that’s good news for the Aussie.”

The New Zealand dollar also rose 0.13 percent to $0.6305 in Asian trade, after surging 1.3 percent on Thursday (13/4/2023).

Elsewhere in Asia, the Japanese yen edged up to 132.44 per dollar, while the offshore yuan edged up about 0.1 percent to 6.8635 per dollar.

Also read: The dollar falls as producer prices fall, the euro reaches a year high
Also read: Gold jumped $30.40 as the greenback weakened
Also read: The dollar is sluggish, cooling US inflation will soon end the Fed’s interest hike

Translator: Apep Suhendar
Editor: Click Dewanto


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