Schedule dollar index at intervals of 60 minutes
The US dollar hovered around a 2.5-month low versus major peers on Wednesday as traders bet the Federal Reserve will remain resilient and stick to ultra-soft policy ahead of the data, which is expected to show sharp gains. annual inflation in the United States.
Analysts predict the report will show a 3.6% year-on-year rise in consumer prices at 12:30 GMT, aided by a low base last April. The monthly forecast assumes a modest growth of 0.2%.
The higher numbers could put more pressure on the Fed to raise interest rates – a concern that helped fuel a sell-off in rate-sensitive tech stocks this week. But the currency markets were calmed by repeated promises of patience from the Fed speakers, and the dollar was pressed by the rise in commodity prices and commodity currencies.
Following a report of faster economic growth in Europe, the dollar hit its lowest level in more than two months against the euro on Tuesday, and traded at $ 1.2126 in Asia. The yen fell 0.2% to 108.835 per dollar.
Risk aversion helped the dollar index, the haven currency, climb marginally to 90.278 as selling pressure in equity markets continued, but it still left the dollar index slightly above key support at 89.677 and 89.206.
Commodity currencies cooled off ahead of milestone peaks, with the Australian dollar and kiwi shedding 0.5% and dipping just below their latest 10-week highs, while the Canadian dollar was little changed, almost hitting a nearly four-year high on Tuesday.
Sterling held on to the recent gains and traded at $ 1.4118.
“Until a more radical correction occurs in the stock market, the dollar is unlikely to gain support as a defensive currency,” said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.
“We now know that the Fed is very firmly committed to ultra-soft policies,” he said. This view is underpinned by recent comments from Fed members, which made Dallas Fed President Robert Kaplan’s announcement of a cut in support last month an exception.
“Everyone else has firmly stated that now is not the time … and this is a negative story for the dollar.”
St. Louis Federal Reserve Bank President James Bullard said Tuesday that he expects inflation to remain at 2.5% next year, while Fed Deputy Governor Lala Brainard said last week that weak labor market data show that recovery still has a long way to go.
“Remaining patient with the temporary surge (inflation) associated with reopening (the economy) will help ensure that the main economic momentum that will be required to achieve our goals, as some of the current tailwinds may turn into headwinds, is not constrained by premature financial tightening. conditions, ”she said. US nominal yields rose with a focus on inflation, but real yields remain negative and under pressure.
The US currency is also under pressure from improved global growth prospects, which tend to attract investor money to emerging markets, as well as from a large and growing US trade deficit and current account deficit, which suggests an outflow of dollars abroad.
The dollar index “shows some risk aversion stability just above 90” amid the sell-off in stocks, “but it hardly has any meaningful upside potential,” Westpac strategists write in the report.
“Fed members continue to stress their pledge to be patient,” while “eurozone recovery rates continue to close the gap with the US,” so the dollar index is set to fall over the next few months, they said.
In the digital space, Ethereum is up about 4% to a record $ 4,358.38, bringing it up 56% this month.
This is because the larger competitor Bitcoin remains stuck below $ 60,000, almost a month after hitting a record high of $ 64,895.22. It last traded around $ 57,471.20.