Dollar rises but stays near a five-month low

by Jonathan Adams

The U.S. dollar rose but stayed near a five-month low as the focus remains on U.S. inflation data and a ECB policy decision

The dollar rose on Thursday morning in Asia but stayed near a five-month low as the focus remains on U.S. inflation data and a European Central Bank (ECB) policy decision, both due later in the day.

The U.S. Dollar Index edged up 0.07% to 12:13 by 4:13 AM GMT.

The USD/JPY pair edged down 0.05% to 109.56.

The AUD/USD pair edged up 0.05% to 0.7733 and the NZD/USD pair edged up 0.06% to 0.7183.

The USD/CNY pair edged down 0.01% to 6.3856. People’s Bank of China governor Yi Gang predicted at the Lujiazui Forum in Shanghai that consumer inflation will stay under 2% in 2021, below the government’s official target of about 3%.

The economy is operating within a reasonable range close to the potential output level, and prices are overall manageable, he added.

The GBP/USD pair edged down 0.04% to 1.4112.

Moves remained small as investors continued to take a wait-and-see approach that also removed some market volatility.

The U.S. inflation data, including May’s consumer price index, is much anticipated after the previous month’s report said that consumer prices rose by the largest margin in 12 years in April.

Although the greenback remained bound to a narrow range ahead of the data, benchmark 10-year U.S. Treasury yields have stumbled within the past week, dropping from 1.6350% on the past Friday to 1.874% earlier in the Asian session.

It feels like the balance of risk is tilted to the upside on U.S. CPI versus the consensus, which would favour a sell-off in Treasuries, and thus higher yields and subsequently a stronger dollar. Bonds seem overbought, Pepperstone head of research Chris Weston said in a note.

On the central bank front, investors will be looking out for any signs that the ECB will start tapering its asset purchases in its policy decision. Although the central bank is widely expected to keep the status quo on its policy, any signs of tapering could impact the euro’s movement.

The single currency advanced to a one-week high at $1.2218 on Wednesday before finishing little changed and stayed near the $1.2178 mark as the Asian session opened.

This article is for information purposes only.
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