Dollar holds steady ahead of a key US inflation data

by Jonathan Adams
Dollar

Trading was largely subdued in Asia with markets in China and Hong Kong still closed for the Lunar New Year holidays and traders on guard ahead of Tuesday’s release of U.S. consumer prices data

The dollar stayed near 150 yen on Tuesday and held broadly steady ahead of a key figure on U.S. inflation due later in the day, while bitcoin soared to a more than two-year high.

Trading was largely subdued in Asia with markets in China and Hong Kong still closed for the Lunar New Year holidays and traders on guard ahead of Tuesday’s release of U.S. consumer prices data.

The dollar rose to a more than two-month high of 149.58 yen, edging toward the closely-watched 150 level that analysts said would likely trigger further jawboning from Japanese officials in an effort to support the currency.

The yen, which has already weakened over 5% against the dollar year-to-date, is under persistent pressure as investors pare back their expectations of the scale and pace of the Federal Reserve’s easing cycle.

Yen bears are also being emboldened by signs the BoJ will resist aggressively hiking rates even if it exits negative interest rates this year as markets are wagering.

It is a bit of a yield story. Yields in the U.S. are around their highs for 2024, so that has certainly helped dollar/yen, said Tony Sycamore, a market analyst at IG.

It is also being supported by carry. With volatility so low and, for 2024, the markets have been pretty happy to add risk to their portfolios, and the carry trade is certainly part of that, which supports dollar/yen because of the yield differential, he added.

Elsewhere, the New Zealand dollar dropped 0.38% to $0.6105, after a Reserve Bank of New Zealand survey showed on Tuesday the country’s inflation expectations fell to more than two-year lows in Q1.

The euro edged down 0.04% to $1.0767, while sterling dropped 0.1% to $1.26165.

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