He global dollar fell again after the data of inflation in United Statess, while the Japanese yen strengthened this Wednesday amid growing bets on a rate hike at the next meeting of the Bank of Japan (BOXWOOD).
The consumer prices in the United States (CPI) rose slightly more than expected in November as energy costs rose, pointing to an inflationary trend that aligns with the view of the Federal Reserve (Fed) of a slower path of rate cuts this year.
Inflation rose 0.4% last month after rising 0.3% in November, the Department of Labor, Bureau of Labor Statistics. In the 12 months through December, the CPI advanced 2.9% after rising 2.7% in November.
He dollar index — which measures the performance of the greenback relative to a basket of six other internationally relevant currencies — weakened 0.1% after the release and fell to 109.07, below the 26-month high of 110.17 that reached on Monday. In October 2022 it reached 114.78, its highest level since 2002.
“The colder inflation data was a signal for traders to reduce some long positions in the dollar,” he said. Joseph Trevisani, senior analyst at FX Street in New York.
Trevisani believes that Fed will be very cautious about resuming rate cuts until there is absolute certainty that inflation is falling again. He doesn’t think so.
The yen strengthens
However, there was enough information to keep forex traders busy before then, particularly in Japan, where the yen was strengthened by the comments of the BOJ governor, Kazuo Ueda who said the central bank would raise interest rates and adjust the degree of monetary support if improvements in the economy and price conditions continue.
His comments come just one day after Lt. Gov. Ryozo Himino said the BOJ would debate whether to raise interest rates at next week’s policy meeting.
He dollar fell 0.93% against the Japanese yen, to 156.49 yen, as Japanese government bond yields, particularly rate-sensitive two-year yields, hit multi-month highs.
“It would be strange if the BOJ does not attend the January meeting,” said Jordan Rochester, head of EMEA fixed income, currencies and commodities strategy at Mizuho, pointing to multiple factors, including a rebound in the Japanese CPI, firm wages and higher oil prices.
“Of course, a lot depends on next Monday with Trump,” he added, referring to the inauguration of the president-elect of the United States. Donald Trump. “If it weren’t for that event risk, this market would be close to completely discounting the meeting.” “The bearish move in USD/JPY this morning is what to watch,” he added.
Eye on Europe
Eyes were also on Great Britain, where data showed inflation slowed unexpectedly last month and basic indicators of price growth – monitored by the Bank of England– fell more sharply, good news for Finance Minister Rachel Reeves after a market sell-off.
While bond yields british government fell sharply after the data, causing investors to raise expectations of a Bank of England rate cut in February.
The pound sterling was last up 0.1% at $1.2229, while the euro fell 0.15% to $1.0299.
Analysts said that as the rise in U.S. bond yields State last week raised concerns about the state of the British economy and caused the pound to fall, lower government bond yields were a support for sterling today, contrary to the typical pattern.
Eyes were also on China, where the onshore yuan weakened to trade at just a fraction of the daily downside limit of its trading band with the US dollar, maintaining a weak bias despite persistently firmer-than-expected official guidance and signs of tightness in the domestic money markets.
Source: Ambito