The dollar fell ahead of US inflation data, still at a month high vs. the yen

Singapore (Armfalcon.com) – The dollar slumped against most of the other major currencies in Asia on Wednesday afternoon, with the exception of the yen, as investors looked to US inflation data later today to provide some clues about how quickly US interest rates will peak.

Against a basket of six other major currencies, the US dollar index was down 0.07 percent to 102.05.

The euro last traded 0.12 percent higher at $1.0926 and sterling was up 0.02 percent to $1.2430, with both currencies some distance from the one-week lows reached on Monday.

US inflation data for March is forecast at 5.2 percent year-on-year, down from 6.0 percent previously, while core inflation is likely to rise to 5.6 percent, according to a Reuters poll of economists.

“That could be the difference between a 25 basis point hike or a lull at the Fed’s next meeting in May,” said Matt Simpson, senior market analyst at City Index, adding that money markets could “quickly return to their expected policy lull” if more inflation data comes in. softer than expected.

Money markets are pricing in about a 74 percent chance that the Fed will raise interest rates by 25 basis points next month, although some rate cuts are also expected in early July into the end of the year.

A series of Fed speakers on Tuesday (11/4/2023) offered little guidance on how far US interest rates will rise. New York Fed President John Williams said it depended on the data coming in.

Philadelphia Fed President Patrick Harker said he felt that the end of rate hikes may be near, while Chicago Fed President Austan Goolsbee said the US central bank should be patient with raising rates in the face of recent banking sector pressures.

Banking turmoil sparked by the collapse of Silicon Valley Bank last month has added to bets that the Fed will not raise interest rates as high as previously feared to ease pressure on the sector.

Against the yen, the dollar rose to a nearly one-month high of 134.045, a reflection of the stark contrast between the Fed’s aggressive monetary policy tightening cycle and the Japanese central bank’s (BoJ) ultra-loose policy.

The International Monetary Fund (IMF) said in its global financial stability report released on Tuesday (11/4/2023) that the BoJ can help prevent sudden policy changes later by allowing more flexibility in yield curve control policies.

Elsewhere, the Aussie was up 0.32 percent to $0.6675, while the kiwi was up 0.19 percent to $0.6204.

In cryptocurrency markets, bitcoin slipped slightly to $30,001, holding above the key $30,000 level after breaking it for the first time in 10 months on Tuesday (11/4/2023). Ether, the second largest cryptocurrency, reached US$1,867.90.

Translator: Apep Suhendar
Editor: Guido Merung
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