Dollar steady ahead of US inflation data, yen near one-year low
By Brigid Riley
TOKYO (Reuters) – The dollar held firm on Monday as traders awaited another batch of U.S. inflation data that is expected to offer further clues this week on whether the Federal Reserve has more work to do to tame price pressures.
The Japanese yen remained vulnerable, hovering not far from a one-year low against the greenback as markets remained on watch for possible intervention by Tokyo.
The focus for most traders will be firmly on U.S. consumer price index (CPI) numbers due on Tuesday after the Fed’s policy meeting this month tempered its hawkish stance although Fed Chair Jerome Powell last week hinted that the battle against inflation may not be over yet.
In addition to the data, more Fed speakers are lined up to speak this week, who are likely to echo Chair Powell in leaving the door open for further hikes, said Matt Simpson, senior market analyst at City Index.
“Even if we’re treated to a softer CPI print, the Fed are likely to continue to push back against hopes of rate cuts as it’s not in their interest to even think about cutting rates, let alone mention it whilst inflation remains above target,” he said.
Market reaction was muted to news announced shortly before foreign exchange trading closed in New York on Friday that Moody’s (NYSE:MCO) lowered its outlook for the U.S. credit rating to “negative”.
The dollar index, which measures the dollar against a basket of currencies, was last mostly flat at 105.80.
There was little relief for the yen, however, which has come under pressure from rising U.S. Treasury yields and continued dollar strength.
The Japanese currency was trading around 151.69 yen against the dollar on Monday, just under a one-year low of 151.74 hit at the end of October.
A hot number from one of the U.S. economic data releases this week “would certainly do the trick” in pushing dollar/yen to the 152 range, said Tony Sycamore, a market analyst at IG.
“Alternatively, a continuation of the more supportive risk backdrop would likely entice carry buyers to add to positions and test the measure of the (Bank of Japan).”
Data out of Japan on Monday, meanwhile, showed wholesale inflation slowed below 1% for the first time in just over 2-1/2-years, suggesting cost pressures that had been driving up prices were starting to fade and giving little support to the yen.
An upward trend in prices propelled the Japanese central bank to upgrade its inflation forecasts at its October monetary policy meeting, as markets continued to seek signs that the bank may be close to exiting its ultra-loose monetary policy.
Elsewhere, sterling stood firm at $1.2231 to the dollar ahead of UK average weekly earnings data on Tuesday and a CPI reading on Wednesday, after GDP data last week showed the economy failed to grow.
The euro was hovering around $1.0688.