Singapore, April 13 (BNA): The dollar remained weak in Asian trade on Thursday after weakening overnight as cooler-than-expected US inflation data completed expectations that the Federal Reserve’s monetary tightening will end next month with one last rate hike.
The dollar index, which tracks the currency against six major peers, fell 0.6% overnight and was threatening to touch a fresh two-month low earlier in the Asian session before recouping some losses. The index closed up 0.069% at 101.53, continuing its trajectory for the fifth straight week of losses.
The consumer price index rose 0.1% last month after rising 0.4% in February, with a drop in gasoline prices offset by higher rental costs. Economists polled by Reuters had expected the consumer price index to rise 0.2 percent in March.
“While declining inflation trends persist and widen across core, core and superior measures, the CPI report is hardly clear on inflation,” said Saxo Markets Strategists.
Simon Harvey, head of foreign exchange analysis at Monex Europe, said the data showed that underlying demand within the US economy remains large enough to keep inflation above the Fed’s 2% target.
“This not only reinforces the need to raise rates again, but it doesn’t necessarily represent a outlook for domestic demand about to capitulate amid impending tightening credit standards and a collapse in consumer sentiment,” Harvey said.
Meanwhile, minutes from the Fed’s last meeting in March showed that several federal policymakers considered pausing interest rate increases after the failure of two regional banks, but concluded that high inflation needed to be addressed.
The minutes also showed staff expectations for a mild recession later this year.
The Fed raised rates by 25 basis points in March, and markets are pricing in a 70% chance of another 25 basis point increase in May before a year-end rate cut, according to CME FedWatch.
San Francisco Federal Reserve Bank President Marie Daley said Wednesday that while US economic strength, a tight labor market, and very high inflation suggest the Fed has “more work to do” on raising interest rates, factors Others, including tighter credit terms, may call for suspensions.
“Headline CPI slowed more than expected, while the Fed is nearing the end of the tightening cycle, and growth is not hot but not cold, resulting in a gold-like environment,” said Christopher Wong, currency analyst at OCBC in Singapore.
Investors’ attention will now turn to retail sales on Friday to assess how consumer spending will be affected.
The euro rose 0.02% to $1.0991, after touching a two-month high of $1.1005 earlier in the session. The currency rose 0.7% on Wednesday and is poised for a fifth consecutive week as traders bet that Europe will stay on a monetary tightening path for much longer.
The Japanese yen fell 0.05% to 133.21 per dollar, while the British pound was last trading at 1.249 dollars, up 0.07% on the day, after rising about 0.5% on Wednesday.
The Australian dollar rose 0.33% to $0.671, after the leading jobs report strengthened the case for another rate hike and pushed bond yields higher.
The kiwi fell 0.08%, to $0.622.
In cryptocurrencies, bitcoin was last up 0.41% to $30,091.14. Ethereum, up 0.34%, at $1,915.38.
HF