The U.S. currency was supported by higher Treasury yields in the aftermath of surprisingly robust domestic jobs data at the end of last week, which sparked a drastic paring of bets for Fed rate cuts this year
The dollar hovered near a one-month high against the euro and pushed to a one-week high versus the yen on Tuesday as traders braced for key U.S. inflation data and latest Fed interest rate forecasts the following day.
The U.S. currency was supported by higher Treasury yields in the aftermath of surprisingly robust domestic jobs data at the end of last week, which sparked a drastic paring of bets for Fed rate cuts this year.
The BoJ sets policy on Friday, and while investors expect a cut in the central bank’s monthly government bond purchases as early as this meeting, gaping yield differentials with the U.S. have kept the yen on the defensive.
The dollar gained 0.15% to sit at 157.275 yen after earlier hitting its highest since June 3 at 157.335.
The euro was flat at $1.076825. It slipped to as low as $1.0733 on Monday, a level last seen on May 9, after gains by the far right in European Parliament elections spurred French President Emmanuel Macron to call a snap election.
Sterling was steady at $1.27355 ahead of labour data later in the day that is forecast to show a slowing in the decline in UK employment.
The U.S. dollar index, which measures the currency against three other major rivals, was little changed at 105.12, after touching 105.39 on Monday for the first time since May 14.
Economists polled by Reuters expect headline U.S. CPI to drop to 0.1% from 0.3% last month, and core price pressures to remain stable on the month at 0.3%.
No policy change is expected at the conclusion of the Federal Reserve’s two-day policy meeting ending Wednesday, but officials will update their economic and interest rate projections.
Expect the Fed to remain cautious, stressing data dependency and the need to see further evidence that the disinflationary trend is firmly intact to give them confidence to move forward with easing rates, according to Jack Janasiewicz, a portfolio manager at Natixis Investment Managers Solutions. As always, the data is in the driver’s seat.
