Ajit Karn
On Monday, the dollar hovered near a five-week high against its major counterparts due to rising wagers on prolonged Federal Reserve policy tightening ahead of Tuesday’s crucial consumer price report.
Tuesday’s expected nomination of a candidate who supports the current policy settings as the new Bank of Japan governor weighed on the yen.
The risk-sensitive Australian and New Zealand dollars declined alongside Asian equities due to concerns that rising US interest rates will stifle economic growth. Sterling retreated as well.
“The dollar has been well supported since the much stronger-than-expected US employment data earlier this month,” said Shinichiro Kadota, senior FX strategist at Barclays in Tokyo. “However, the focus will be on tomorrow’s CPI,” he added.
I believe the market is more concerned about inflation’s upside risks than downside risks.
Ahead of Tuesday’s CPI report, revisions to the previous data set showed consumer prices rose in December instead of falling as previously estimated.
Separately, surveys conducted by the University of Michigan projected a one-year inflation rate of 4.2%, which was higher than the final figure for January. Fed Chair Jerome Powell has cited the Michigan survey as one of the indicators the US central bank tracks.
The dollar index, which compares the greenback to six other currencies including the yen, euro, and pound, rose 0.068% to 103.65, remaining close to last Tuesday’s high of 103.96, the highest level since January 6.
The US currency gained 0.18% to 131.63 yen, although well within the range of the past week of 129.80 to 132.90.
Sources said on Friday that former BOJ board member Kazuo Ueda is set to become the next governor. In an interview the same day, he said it was appropriate for the BOJ to maintain its current ultra-easy policy.
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The euro declined 0.06 percent to $1.0669, while sterling fell 0.12 percent to $1.2044.
The Australian dollar fell 0.13% to $0.6910, while the New Zealand dollar fell 0.08% to $0.6306.
