Stefano Rebaudo
(Reuters) – The dollar struggled on Tuesday ahead of key data that could provide further clues about the U.S. Federal Reserve’s policy path, while the yen rose after data confirmed inflation had topped the Bank of Japan’s target. (BOJ).
Core consumer inflation in Japan rose above forecasts, supporting some expectations that the Bank of Japan could end negative interest rates by April.
“The yen rose after the publication, but rather modestly given its strong short position and the extent of the sell-off since the start of the year,” said Francesco Pesole, currency strategist at ING.
“Ultimately, a cautious BOJ is unlikely to send strong signals about a move earlier than April, and our economics team doubts policymakers will be able to raise rates at all before June.”
The yen rose 0.35% to 150.18. It hit 150.88 in mid-February, its highest level since November 16.
The leading cryptocurrency hit a two-year high in Asian trading amid signs that major players are buying the cryptocurrency.
It was last at $56,360 after hitting $57,036 this morning in Asia, its highest since late 2021. Ether was at $3.232 after hitting $3,275, its highest level since April 2022.
The index, which measures the currency against a basket of peers including the yen, euro and pound, was down 0.05% at 103.71.
Markets have recently lowered expectations for the timing and size of the Fed’s rate cuts this year as the U.S. economy remains strong and inflation pressures have failed to subside significantly.
The release of the PCE deflator on Thursday is one of the key events on the US calendar this week and could indicate less aggressive Fed policy easing bets.
The euro rose 0.1% against the US dollar to 1.0859. It has risen steadily since mid-February, when it hit 1.0695, its lowest level since November 14.
Analysts said the single currency strengthened as markets cut bets on a future rate cut by the European Central Bank to 90 bps. by the end of the year, amid encouraging signals from the economy that support expectations of faster growth in the second half of 2024. .
“We expect the single currency to rise to 1.10 against the US dollar in the short term,” said Roberto Mialic, currency strategist at Unicredit (BIT:).
“If Fed Chairman Powell confirms a higher outlook for longer-term rates in his speech next week, the euro could fall slightly, but not above 1.05,” he added.
Fed Chairman Jerome Powell will give his semi-annual report on monetary policy to the Senate Banking Committee next week.
Germany, France and Spain will release inflation data on Thursday ahead of eurozone data on Friday.
ECB officials sounded more cautious about quickly easing monetary policy, with President Christine Lagarde saying wage growth remained robust and ECB chief Yiannis Stournaras ruling out a rate cut before June.
Market participants call central bank officials who advocate tight monetary policy to control inflation hawks, while doves focus more on economic growth and the labor market.
Elsewhere in markets, the Australian dollar gained 0.2% to $0.6552 ahead of monthly consumer price data due on Wednesday.
The rate was down 0.1% at $0.616 as traders prepare for a key Reserve Bank of New Zealand (RBNZ) policy meeting on Wednesday.
Markets are putting the odds of the RBNZ raising its policy rate by 5.5% to combat persistent inflation at one in three.
“Given the NZD’s rich positioning and current prices, if we see the RBNZ leave rates unchanged, it could lead to immediate selling of the NZD,” Chris Weston, head of research at Pepperstone, wrote in a note.
“I rarely advocate trading in isolation at a central bank meeting, but I see the risk skewed higher in this statement.”