The woman holds US dollar bills in this illustration taken on May 30, 2022. Reuters/Dado Ruvik/Illustration/File Photo Get licensing rights
TOKYO, Sept 13 (Reuters) – The dollar was broadly steady ahead of a key U.S. inflation report later on Wednesday, although it rose on the yen as traders weighed comments from Japan’s top central banker about a possible early exit from negative interest rates. Digested. Policy.
The US currency rose about 0.2% against the yen to 147.39. It has now firmly pulled back its biggest one-day percentage rise in two months, which followed comments from Bank of Japan (BOJ) Governor Kazuo Ueda over the weekend on Monday.
Investors have more time to consider Ueda’s comments more carefully, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“In our view the statement was quite conditional, (Ueda) did not make any promises,” he said.
Influential ruling party lawmaker Hiroshige Seko also signaled his preference for ultra-loose monetary policy after Ueda’s comments on Tuesday sent the yen and bond yields rising.
The yen continues to be under pressure against the dollar as the BOJ remains a dovish stance among global central banks, especially since the Federal Reserve has launched an aggressive rate-hike cycle in March 2022.
Data released earlier on Wednesday showed Japan’s annual wholesale inflation slowed for the eighth consecutive month in August, although at 3.2% it remained above the central bank’s 2% target.
Broadly speaking, the dollar remained strong, although moves were slow as traders closely awaited US inflation readings due on Wednesday.
Sterling fell 0.05% to $1.2489, while the Australian dollar fell 0.03% to $0.6408.
The US dollar index, which measures the greenback against a basket of rivals, was steady at 104.61, after slipping to a one-week low on Monday and its biggest daily decline in two months.
Analysts attributed the decline to the unwinding of long dollar positions following recent resilient US economic data.
Wednesday’s US consumer price index (CPI) data for August comes just a week before Federal Reserve officials gather to decide on interest rate policy. Headline CPI is expected to increase by 0.6% compared with 0.2% a month earlier and by 3.6% on an annual basis.
While the central bank is largely expected to keep rates unchanged at next week’s meeting, the Fed’s next move in November remains more uncertain, according to CME’s FedWatch tool.
“I think the Fed has a chance to raise interest rates one more time this year,” said Tina Teng, market analyst at CMC Markets.
Elsewhere, the euro was steady at $1.0753. It hit a one-week high of $1.0777 in the previous session as the market placed its bets on further interest rate hikes ahead of the European Central Bank’s (ECB) monetary policy decision.
The ECB expects inflation in the 20-nation euro zone to remain above 3% next year, a source told Reuters, strengthening the case for a tenth consecutive interest rate hike on Thursday.
“In recent months, European inflation, especially core inflation, has fallen more slowly than expected. This has caused some serious headaches for the ECB,” Rabobank analysts said in a note.
“The high inflation rate warrants another rate hike, but economic indicators… indicate that a recession is imminent.”
Reporting by Brigid Riley; Editing by Sri Navaratnam and Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
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Source: www.reuters.com
