Meanwhile, China’s offshore yuan failed to hold on to a brief pickup from a two-month low amid mixed domestic economic data, as expectations grow for Beijing to roll out more stimulus measures soon

The dollar index hovered at a one-month high against a basket of currencies on Wednesday as remarks by Fed Governor Christopher Waller dampened expectations for a rate cut in March.

Meanwhile, China’s offshore yuan failed to hold on to a brief pickup from a two-month low amid mixed domestic economic data, as expectations grow for Beijing to roll out more stimulus measures soon.

In a boost to the dollar, Waller said that while the U.S. is “within striking distance” of the Fed’s 2% inflation goal, the Fed should not rush towards cuts in its benchmark interest rate until it is clear lower inflation will be sustained.

Market expectations of a rate cut in March have eased to a 62.2% probability versus a 76.9% chance in the earlier session, as per CME’s FedWatch Tool.

While the market’s latest pricing brings the Fed rate curve into more sensible territory, “with 157 bps of rate cuts still priced in for 2024, there is room for this to ease back,” said Tony Sycamore, market analyst at IG.

Remarks by ECB President Christine Lagarde later on Wednesday could bring further repricing, Sycamore said.

Rate cuts are coming but not as soon as some might be hoping for, he added.

The dollar index jumped to 103.55, its highest level since December 13.

U.S. retail sales data will be published later on Wednesday.

In China, official data showed the economy grew marginally slower than expected in Q4, while a deepening property crisis, soaring deflationary pressures and weak demand continue to plague the country.

The offshore Chinese yuan rose to 7.2073 per dollar after the data release but slipped back to 7.220, not far from the two-month low of 7.2229 reached on Tuesday.

The Australian dollar, often used as a liquid proxy for the yuan, dropped 0.44% versus the dollar to a new one-month low of $0.65515.

The kiwi was 0.33% lower at $0.6114.

Meanwhile, the euro dropped to a new one-month low at $1.0858, as several ECB policymakers’ comments this week maintained uncertainty over the timing of rate cuts.

Sterling similarly dropped to its lowest since December 13 at 1.25995. It was last trading at $1.26005, 0.28% lower on the day, ahead of UK consumer price index (CPI) data for December due at 0700 GMT.

The yen dropped under some pressure again as U.S. bond yields rose overnight to support the greenback. The dollar was 0.47% higher against the Japanese currency, pushing it to a new one-and-a-half low of 147.88 per dollar.