Gertrude Chavez-Dreyfus and Joyce Alves
NEW YORK/LONDON (Reuters) – The dollar fell from a new three-month high on Wednesday as investors consolidated gains after a hotter-than-expected U.S. inflation report in the previous session delayed bets on the Federal Reserve’s first rate cut for some time. time. in the middle of the year.
As Tuesday’s data showed the US consumer price index (CPI) rose 3.1% in January from a year earlier, compared with expectations for a 2.9% rise, Fed fund futures priced in no Fed cut in March and a nearly 80% chance of monetary policy easing in March. June meeting, according to the LSEG rate probability appendix.
Futures also call for about three rate cuts this year of 25 basis points each.
The index, which measures the U.S. currency against six other major currencies, fell 0.1% to 104.97, hitting a new three-month high of 104.97.
“The U.S. dollar may have little room left for further gains before the end of the first quarter of this year,” said Helen Given, a currency trader at Monex USA in Washington.
“As the US economy continues to remain extremely resilient, we may see further rhetoric from Fed officials that will push the US dollar higher,” she said.
“I started using the term ‘American expectations’ when discussing the US dollar picture because the US economy’s outperformance over its peers has become almost so commonplace over the past year that we have come to expect it.”
INFLATION IN UK
Sterling fell 0.4% to $1.2541 after briefly touching an eight-day low as data showed UK inflation did not accelerate in January as expected. This could ease pressure on the Bank of England (BoE) to keep rates unchanged for longer.
UK inflation was 4.0% year on year in January, unchanged from December. Economists polled by Reuters had forecast growth to 4.2%.
Money markets see a 51% chance of a BoE rate cut in June and a 75% chance of a rate cut in August, according to LSEG app Refinitiv.
Meanwhile, the dollar weakened against the yen after Japan’s top currency officials warned against what they called a rapid and speculative move in the yen.
The dollar fell 0.1% to 150.585 yen, not far from the three-month high hit against the Japanese currency on Tuesday. Since the beginning of this year, the dollar has gained about 10 yen in value.
“We are watching the market even more closely,” Japanese Finance Minister Shunichi Suzuki told reporters. “Rapid steps are not desirable for the economy.”
When asked whether authorities could intervene in the foreign exchange market, Suzuki left his office without saying a word.
Earlier, Japan’s chief currency diplomat, Masato Kanda, said that if necessary, the country would take appropriate action in the Forex market.
Japan intervened in the foreign exchange market three times in 2022 as the yen fell to a 32-year low of about 152 yen to the dollar, conducting rare yen buying and selling interventions.
Elsewhere, the euro rose 0.1% to $1.0720 amid a flurry of eurozone economic data. It earlier hit a new three-month low of $1.0695.
Eurozone employment rose 0.3% in the fourth quarter and 1.3% year on year. Employment was expected to grow 0.2% in the quarter and 1.1% year-on-year, according to a Reuters poll.
The data also showed that economic growth in the region in the last three months of 2023 was unchanged from the previous quarter and increased by 0.1% compared to the same period in 2022.
In cryptocurrencies, Bitcoin rose 4.1% to $51,578, reaching its highest level since December 2021 and surpassing $52,000.