Gertrude Chavez-Dreyfus
NEW YORK (Reuters) – The dollar was little changed on Tuesday as investors remained cautious ahead of U.S. inflation data due on Wednesday, even as the yen hovered near multi-year lows, keeping traders wary regarding any possible actions by Japan and Japan. support your currency.
Economists expect the headline US consumer price index (CPI) to rise 0.3% month-on-month, down from a 0.4% rise in February, according to a Reuters poll. The core consumer price index is also expected to rise 0.3% in March.
Ahead of the CPI report, the U.S. futures market raised the odds of a June rate cut to 58%, up from 52% late Monday, the FedWatch CME tool showed.
For 2024, fed funds futures will be cut by about 74 basis points (bps), or about three rate cuts of 25 basis points (bps) each, the data shows.
“The dollar hasn’t responded much to the rise in Treasury yields,” said Eugene Epstein, head of structured products for North America at Moneycorp in New Jersey.
He noted that since the beginning of the year, the benchmark 10-year bond yield has risen by about 47 bps, but the dollar has risen only 2.5%.
“One of two things could happen in the near future: either the dollar will strengthen to catch up with Treasury yields, or Treasury yields will decline again. This discrepancy should be reduced. And it’s only a matter of time before this gap narrows.”
The index, which tracks the currency against six major peers, was steady at 104.12 in afternoon trading.
The dollar failed to make any progress despite a slew of hawkish signals from Fed officials last week and on Monday.
Dallas Fed President Laurie Logan, for example, spoke out on Friday after the jobs data against imminent monetary easing. Chicago Fed President Austan Goolsbee, on the other hand, said Monday that the Fed must weigh how long it can maintain its interest rate stance without hurting the economy.
Beyond U.S. interest rates, some analysts believe geopolitical risk could increase demand for safe-haven assets, including the dollar.
Hopes for a ceasefire in the Gaza Strip have diminished after Hamas said the Israeli proposal received from Qatari and Egyptian mediators did not meet the demands of the Palestinian factions.
The dollar was unchanged and slightly lower against the yen at 151.755 yen, not far from a 34-year high of 151.975 yen hit last month as Japanese officials continued to try to boost the currency.
The threat of intervention kept the dollar from breaking through the closely watched 152 yen level.
“I kind of thought that since Japanese Prime Minister (Fumio) Kishida is in the US, the risk of intervention is very low because it would be awkward if Japan intervened,” said Mark Chandler, chief market strategist at Bannockburn Global Forex at New York.
Kishida is in the United States with Philippine President Ferdinand Marcos Jr. for an economic and defense summit.
“The Fed hasn’t cut interest rates yet, which means the Fed is more concerned about inflation. But a strong dollar helps keep inflation in check. So, if you have an ally (like Japan) selling dollars, but you want a strong dollar, it can send mixed messages,” Chandler said.
A strong dollar makes imported goods cheaper for U.S. consumers, helping to cushion some of the impact of high inflation.
Also on Tuesday, Bank of Japan Governor Kazuo Ueda said the central bank should consider reducing monetary stimulus if inflation accelerates.
The euro fell 0.1% to $1.0852 and sterling rose 0.1% to $1.2666.
Investors are also looking ahead to the European Central Bank meeting on Thursday. Analysts expect the ECB to keep rates this week, but repeating its decisions will depend on data.