The dollar index slid 0.1% to 104.72, having reached a new three-month high of 104.97
The dollar slipped from a fresh three-month high against major currencies on Wednesday, as investors consolidated gains following the previous session’s hotter-than-expected U.S. inflation report.
The inflation data for January pushed back bets on a first Fed rate cut to the middle of the year.
The dollar also softened against the yen after Japan’s top currency officials warned against what they described as rapid and speculative yen moves.
The dollar shed 0.2% to 150.52 yen, not too far from a three-month high reached against the yen on Tuesday. The greenback has gained nearly 10 yen in price since the start of this year.
Since Tuesday’s data showed that the U.S. CPI gained 3.1% in January on a year-on-year basis, compared with an expected 2.9% increase, fed funds futures have priced in no rate cut in March and an almost 80% probability of easing at the June meeting, per LSEG’s rate probability app. Two weeks back, markets had expected the first rate cut to occur in May.
Futures are also pricing in about three rate cuts of 25 bps each this year, down from around five cuts two weeks earlier.
The dollar index slid 0.1% to 104.72, having reached a new three-month high of 104.97.
The stronger dollar is now the path of least resistance. We do not think it is time yet to fade those moves, said Vassili Serebriakov, FX strategist, at UBS in New York.
But things can change rapidly and we have retail sales on Thursday, although we do expect a robust number again. That should support dollar strength, Serebriakov added.
Economists expect a 0.1% drop in U.S. retail sales in January, from a 0.6% rise in December, a Reuters poll showed.
