Dollar falls after inflation data
2023.01.13 02:05
Dollar falls after inflation data
By Kristina Sobol
Budrigannews.com – On Friday, the dollar fluctuated as waning U.S. inflation raised hopes that the Federal Reserve would slow the rate at which it raises interest rates. On the other hand, the yen hovered around a seven-month high on growing speculation that the Bank of Japan might further loosen its ultra-loose monetary policy.
The, which compares the dollar to six other currencies, increased by 0.117% to 102.280 after falling to its lowest level since June earlier in the session.
After reaching a new seven-month high earlier in the day of 128.65 per dollar, the Japanese yen increased by 0.13 percent against the dollar to 129.09 earlier today.
The BOJ shocked the market last month by widening the band surrounding its 10-year bond yield target. However, the move has not eliminated market distortions brought on by the BOJ’s massive bond purchases, leaving traders to speculate as to whether additional steps might be taken as early as its rate review on January 17-18.
According to Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:), “With the dollar/yen moving below 130, there will likely be some unwinding in the pair given the fact that market participants appear to be expecting some further policy tweak from the BOJ next week.”
Kong stated that traders are still anticipating the end of the ultra-easy policy and that they will likely be disappointed if the BOJ does not act, which will likely support the dollar/yen next week.
In the meantime, after U.S. consumer prices unexpectedly fell for the first time in more than two and a half years in December, policymakers at the Federal Reserve expressed relief about easing inflation. This paved the way for the central bank to slow the pace of monetary tightening.
In a speech to a local group in Malvern, Pennsylvania, Philadelphia Fed President Patrick Harker stated, “Hikes of 25 basis points will be appropriate going forward.”
After four straight increases of 75 basis points throughout the year, the U.S. central bank raised interest rates by 50 basis points in December. However, it stated that in order to control inflation, it would need to keep them higher for longer.
NYSE: Goldman Sachs Though they cautioned that it was still too early in the process for central banks to feel confident declaring victory, strategists stated that the December inflation data likely seals the deal on a shift to 25 basis point hikes in February.
Futures traders betting on the Fed’s policy rate bet heavily on quarter-percentage point increases beginning at the meeting on January 31 and ending on February 1, as well as a pause just below 5%, with interest rate cuts priced in for later in the year.
According to Lombard Odier chief economist Samy Chaar, “markets pricing immediate rate cuts by the Fed as soon as June/July, right after its last hike in March/April, seems at odds with the fact that the Fed still wants tight financial conditions to avoid any overheating of the labor market.”
“To ensure contained wage growth dynamics, we expect the Federal Reserve to stop hiking interest rates in the first quarter of 2023, but refrain from cutting them for an extended period of time.”
The euro fell 0.01 percent to $1.0845 in other markets, falling from its nine-month high earlier in the session. Today, sterling was trading at $1.2194, down 0.05%.
The Australian dollar fell 0.27% to $0.695, while the fell 0.33% to $0.637.
Currency bid prices at 0438 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar $1.0843 $1.0851 -0.06% +1.21% +1.0868 +1.0833
Dollar/Yen 129.1200 129.1700 -0.03% -1.61% +129.3400 +128.7200
Euro/Yen 140.03 140.30 -0.19% -0.19% +140.8000 +139.8300
Dollar/Swiss 0.9290 0.9274 +0.17% +0.47% +0.9297 +0.9259
Sterling/Dollar 1.2193 1.2213 -0.18% +0.81% +1.2231 +1.2191
Dollar/Canadian 1.3388 1.3370 +0.14% -1.19% +1.3395 +1.3368
Aussie/Dollar 0.6952 0.6967 -0.19% +2.02% +0.6983 +0.6947
NZ 0.6374 0.6397 -0.34% +0.40% +0.6399 +0.6368
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