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Dollar dips ahead of inflation data later this week
Global Banking & Finance Review®
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By Karen Brettell
NEW YORK (Reuters) – The dollar fell on Tuesday as investors waited on inflation data for further signs of whether price pressures are ebbing and what it means for further Federal Reserve interest rate hikes.
Consumer price data on Wednesday is expected to show headline inflation rose by 0.2% in March, while core inflation rose 0.4%.
“A lot of traders are focused on this inflation data,” said Edward Moya, senior market analyst at OANDA in New York. “Everyone’s trying to get a sense of does the disinflation process return and does this complicate what the Fed does.”
The Fed is seen as likely to hike rates by an additional 25 basis points at its May 2-3 meeting, before pausing in June. Markets are also pricing for the Fed to cut rates by year-end on an expected recession, though Fed officials have stressed the need to keep rates high in order to bring down inflation.
Strong jobs data for March have added to expectations that the U.S. central bank will complete one more rate hike. The data on Friday showed employers added 236,000 jobs while the unemployment rate fell to 3.5%.
The dollar index fell 0.36% to 102.08. The euro gained 0.52% to $1.0918.
The euro was also likely boosted by a rise in European bond yields on Tuesday as traders in the region returned after markets were closed on Friday and Monday for the Easter holiday.
Algorithms trading currencies based on the difference between European and U.S. rates might have sold euros for dollars when U.S. Treasury yields rose after the jobs data while European bond markets were closed, said Simon Harvey, head of FX analysis at Monex Europe.
European bond yields rose sharply on Tuesday, catching up after the break. GVD/EUR
“There’s just that catch-up effect flushing through,” Harvey said.
The dollar also slid against the yen, after jumping on Monday as Bank of Japan Governor Kazuo Ueda signaled no hurry to dial back its massive stimulus. The dollar was last down 0.33% against the Japanese currency at 133.16.
In cryptocurrencies, bitcoin breached the key $30,000 level for the first time in 10 months. It was last up 1.8% on the day at $30,184.
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Currency bid prices at 9:34AM (1334 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 102.0800 102.4700 -0.36% -1.362% +102.5100 +102.0000
Euro/Dollar $1.0918 $1.0861 +0.52% +1.89% +$1.0926 +$1.0862
Dollar/Yen 133.1600 133.6000 -0.33% +1.56% +133.6800 +132.9700
Euro/Yen 145.38 145.08 +0.21% +3.62% +145.4300 +144.8800
Dollar/Swiss 0.9052 0.9096 -0.49% -2.12% +0.9093 +0.9038
Sterling/Dollar $1.2435 $1.2384 +0.44% +2.84% +$1.2456 +$1.2388
Dollar/Canadian 1.3501 1.3509 -0.05% -0.35% +1.3516 +1.3483
Aussie/Dollar $0.6662 $0.6642 +0.28% -2.29% +$0.6680 +$0.6640
Euro/Swiss 0.9882 0.9876 +0.06% -0.13% +0.9885 +0.9853
Euro/Sterling 0.8778 0.8768 +0.11% -0.75% +0.8784 +0.8764
NZ $0.6210 $0.6217 -0.13% -2.21% +$0.6233 +$0.6199
Dollar/Dollar
Dollar/Norway 10.5760 10.5260 +0.52% +7.82% +10.6010 +10.4690
Euro/Norway 11.5432 11.4231 +1.05% +10.06% +11.5737 +11.4052
Dollar/Sweden 10.4531 10.5212 -0.16% +0.44% +10.5166 +10.4436
Euro/Sweden 11.4085 11.4267 -0.16% +2.38% +11.4412 +11.3920
(Reporting by Karen Brettell; Additional reporting by Alun John in London; Editing by Alexander Smith)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI) or Producer Price Index (PPI).
The Federal Reserve, often referred to as the Fed, is the central bank of the United States. It regulates the U.S. monetary and financial system, aiming to provide a stable financial environment.
A currency index measures the value of a currency against a basket of other currencies. It provides insights into the currency's strength and performance in the foreign exchange market.
Core inflation excludes volatile items such as food and energy prices to provide a clearer view of long-term inflation trends. It helps policymakers gauge underlying inflation pressures.
The dollar index (DXY) measures the value of the U.S. dollar against a basket of six major currencies. It reflects the dollar's strength or weakness in the foreign exchange market.
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