Dollar steady, yen firms on BOJ rate speculation

by Jonathan Adams

The dollar index remained largely unchanged at 102.80, after hitting a nearly two-month low of 102.33 last week

The dollar remained stable on Tuesday as investors awaited key U.S. inflation data later in the day, while the yen strengthened close to a one-month high amid growing speculation that the Bank of Japan might exit negative interest rates as soon as next week.

Compared to the dollar, the euro pulled back from a nearly two-month peak reached last week and was last trading at $1.0931. The pound gained 0.08% to $1.2822, but was still far from Friday’s more than seven-month high.

Currency movements were subdued and the dollar paused its recent decline ahead of the U.S. inflation report due later on Tuesday, which will offer more insight into when the Federal Reserve might start reducing interest rates this year.

While expectations are for core consumer prices to have increased by 0.3% on a monthly basis in February, investors will be watching closely for any surprises to the upside, similar to what happened in January, which could impact the expected pace of Fed rate cuts.

Were we to get a 0.2%, I think the market will be back on the scent of a possible May first Fed rate cut, and if we were to get a 0.4%, I think the market will be casting some doubt on a cut as early as June, said Ray Attrill, head of FX strategy at National Australia Bank.

So in that sense, I think it’s right to think that there will be a high degree of market sensitivity to anything other than a 0.3% core print, Attrill added.

The Australian dollar rose by 0.01% to $0.6615, while the New Zealand dollar slipped by 0.02% to $0.61685.

The dollar index remained largely unchanged at 102.80, after hitting a nearly two-month low of 102.33 last week.

The decline in the dollar has been driven by growing speculation that the Fed might start cutting rates by June, especially following comments from Fed Chair Jerome Powell last week that strengthened those expectations.

Jobs data released on Friday also showed that underlying labour market conditions in the world’s largest economy were softening as the unemployment rate increased to a two-year high of 3.9% in February.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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