Dollar near one-month low to yen as inflation test looms
The dollar suffered a three-day loss against its major peers and traded near a one-month low against the yen on Wednesday, with eagerly awaited U.S. inflation data that could guide the timing of the dollar. ‘an increase in interest rates from the Federal Reserve.
The dollar index, which measures the greenback against six rivals, was little changed at 93.997 after gradually declining from a more than one year high of 94.634 reached on Friday.
The currency was stable at 112.87 yen after dipping to 112.73 on Tuesday for the first time since October 11.
The euro was also roughly stable at $ 1.15915, maintaining a three-day gain that brought it closer to the month’s high of $ 1.16165.
Economists polled by Reuters see October’s U.S. Consumer Price Index accelerate to 0.4% from the previous month’s 0.2% rise, with the closely watched core year-on-year measure gaining 0, 3 percentage point to 4.3%, well above the Fed’s average annual inflation of 2%. target.
âWe’ll need to see a 0.8% month-over-month impression to see the dollar index break out of the high end of the 94.50 range,â wrote Chris Weston, head of research at the Pepperstone broker in Melbourne, in a client. Remark.
Although the dollar has trended lower against the yen, “if the US CPI soars, it poses a risk for USDJPY shorts,” he wrote.
Global inflation figures are being scrutinized to see if upward pressure on prices is accelerating or showing signs of slowing down.
China’s ex-factory prices in October rose at the fastest pace since 1995, beating expectations and further squeezing profit margins for producers struggling with soaring prices for coal and other commodities.
Data on Tuesday showed that producer prices in the United States rose sharply in October, indicating that high inflation could persist amid tense supply chains linked to the pandemic.
Real US Treasury yields fell sharply as traders hedging against the possibility of higher prices grabbed Inflation-Protected Treasury Securities (TIPS).
Analysts said the growing demand signals concerns about inflation taking hold among a wider range of investors and the public.
Fed officials said on Tuesday it was unclear whether high inflation was becoming more entrenched than expected.
San Francisco Fed Chairman Mary Daly said it would be mid-2022 before the outlook for jobs and inflation were any clearer. Minneapolis Fed Chairman Neel Kashkari said he believes the forces that keep people out of the workforce and drive up prices will be temporary.
Meanwhile, US President Joe Biden met with Fed Governor Lael Brainard as the next potential Fed chairman. It would be seen as a conciliatory choice.
“Brainard’s possible appointment as Fed chairman weighs on the (dollar),” Westpac strategists wrote in a research note.
âOtherwise the underlying picture remains favorable for the USD,â and the declines in the dollar index to the mid-93 level are a buying opportunity, they said.
The pound, hammered last week following the Bank of England’s surprise decision to hold rates unchanged, held steady this week and last bought $ 1.3548, up from the low over a month of Friday at $ 1.3425.
The risk-sensitive Australian dollar slipped 0.18% to $ 0.73665, approaching the mid-October low of $ 0.73595, reached late last week.
Contagion fears in China’s struggling real estate sector have flared again, with Evergrande facing a deadline on Wednesday to pay off an offshore bond.
On Tuesday, Kaisa Group appealed for help paying off loans, workers and suppliers, while the Fed sent its first direct warning of the potential damage globally.
In cryptocurrencies, bitcoin hovered below the all-time high of $ 68,564.40 on Tuesday, the last time it changed hands just north of $ 67,000.
Ether traded at $ 4,735.37, also staying close to Tuesday’s record high of $ 4,842.65.