Dollar drifts as low inflation raises questions about taper timing
By Kevin Buckland
TOKYO (Reuters) – The dollar drifted into recent ranges against its major peers on Wednesday after weaker-than-expected U.S. inflation raised doubts about a decline in Federal Reserve stimulus this year.
The dollar index stood at 92.632, little change from Tuesday, when it fell on inflation data to rebound on safe-haven demand as stocks slipped to Wall Street.
The index has hovered between 92.3 and 92.9 over the past week, with several Fed officials suggesting that the US central bank may reduce its debt purchases by the end of the year, even after a much lower than expected salary report earlier this month.
While high inflation kept the pressure on policymakers, overnight data showed that the U.S. consumer price index, excluding the volatile components of food and energy , had risen only 0.1% last month.
The Fed is holding a two-day monetary policy meeting next week, with investors keen to know if a cut announcement will be made.
Tapering tends to benefit the dollar as it suggests that the Fed is one more step towards tightening monetary policy. It also means that the central bank will buy less debt assets, thus reducing the number of dollars in circulation.
“The softer print alleviates concerns about an impending price acceleration and should offset any lingering pressure on the Fed to decline in September,” Rodrigo Catril, senior currency strategist at National Australia Bank, wrote in a statement. customer note.
“But a cut this year still seems like a good bet, November or December now looking more likely.”
Nonetheless, the NAB predicts that the focus of global growth is moving away from the United States, pushing the currency to $ 1.23 against the euro by the end of the year.
One euro bought $ 1.1808 on Wednesday, mostly flat from the previous session.
European Central Bank Chief Economist Philip Lane speaks at the IMFS webinar later in the world day.
The dollar slipped slightly to 109.595 yen, remaining near the center of the trading range for the past two months.
The US currency rose slightly against its rivals on the other side, however, adding 0.1% to $ 0.7316 per Aussie and increasing roughly the same margin to $ 0.7088 against the New Zealand kiwi.
The Commonwealth Bank of Australia is more bullish on the outlook for the dollar, predicting that accelerating US employment costs will keep consumer prices high.
“Inflation above target will prove to be more persistent than the FOMC expects,” CBA strategist Carol Kong wrote in a report.
“The implication is that the FOMC will likely have to raise the fund rate more than what the markets are currently expecting, which could support the USD on the trail.”
Price of currency offers at 0116 GMT
Description RIC Last closure US Pct Change YTD Pct High Bid Low Bid
$ 1.1808 $ 1.1806 + 0.02% -3.36% +1.1808 +1.1801
Dollar / Yen
109.5950 109.6750 -0.06% + 6.12% +109.7350 +109.5550
Euro / yen
129.40 129.48 -0.06% + 1.95% +129.5300 +129.3400
Dollar / Switzerland
0.9199 0.9201 -0.02% + 3.98% +0.9203 +0.9199
Pound sterling / dollar
1.3806 1.3808 -0.02% +1.05% +1.3812 +1.3801
1.2690 1.2693 -0.01% -0.34% +1.2700 +1.2688
Australia / Dollar
0.7316 0.7323 -0.10% -4.90% +0.7322 +0.7312
Dollar / Dollar 0.7088 0.7098 -0.10% -1.26% +0.7099 +0.7086
Points of Europe
BOJ Tokyo Forex Market Information
(Reporting by Kevin Buckland; Editing by Sam Holmes)
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