SINGAPORE (Armfalcon.com) – The dollar was eyeing its first weekly gain in more than a month on Friday, as bets for an interest rate hike by the US Federal Reserve in May strengthened, although gains were capped by weak economic data showing the economy is slowing.
In Asia, Japanese consumer inflation held steady above the central bank’s target in March, with major indexes hitting four-decade highs, exerting pressure on the Bank of Japan (BoJ) to move away from an ultra-loose monetary policy stance.
The dollar slipped against the Japanese yen in early Asian trade, although it was up against most of the other major currencies, with the US dollar index inching up 0.06 percent to 101.84.
Index, which measures greenbacks Against six other major currencies, it is on track for a weekly gain of more than 0.2 percent after five straight weeks of losses.
Growing expectations that the Fed will raise interest rates by 25 basis points in May have provided some support to the greenbacks. Money markets are now pricing in an 84.5 percent chance of such an increase next month, compared with a 67 percent chance a week ago, according to the CME FedWatch tool.
Against the dollar, the euro slipped 0.03 percent to $1.0967 while sterling was down 0.09 percent to $1.24325.
However, increase greenbacks capped after US data released on Thursday (20/4/2023) added to growing recession fears.
The number of Americans filing new claims for unemployment benefits increased moderately last week, indicating the labor market is gradually slowing. A separate report from the Philadelphia Fed showed a measure of factory activity in the mid-Atlantic region fell to its lowest level in nearly three years in April.
“The US economy is headed for a recession,” said Joseph Capurso, head of international and sustainable economics at the Commonwealth Bank of Australia (CBA). “We think (will) be in a recession maybe around the middle of the year.
“But the problem for the Fed is that inflation is still solid at higher levels, so we still think the Fed will raise rates at least one more time.”
Japan’s economy is also showing signs of widespread price pressures, with data out Friday showing the core consumer price index rising 3.1 percent in March from a year earlier, while the index excluding fuel costs rose at its fastest annual pace in four decades.
The dollar was last 0.07 percent lower against the yen at 134.13.
Friday’s data may keep alive market expectations that the BoJ may drop its massive stimulus program later this year, with all eyes on next week’s BoJ policy meeting, the first of which will be chaired by new central bank Governor Kazuo Ueda.
“I don’t think Ueda will change policy at his first meeting next week,” said CBA’s Capurso. “But there’s been some hint of a policy review, so I think that… they’ll move on in the next few months.”
In other currencies, the Aussie was last down 0.07 percent to $0.6738, while the kiwi was down 0.12 percent to $0.61705.
Data out on Thursday (20/4/2023) showed that New Zealand’s consumer price inflation was lower than expected in the first quarter, although it remains near historic highs.
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Translator: Apep Suhendar
Editor: Click Dewanto
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