The Dollar Eases As Markets Shrug Off Inflation Revisions

(CTN News) – A fourth consecutive week of dollar gains ended on Friday due to traders’ reduced expectations of an interest rate increase by the Bank of Japan. In addition, traders reduced expectations of a Federal Reserve rate cut.

In December, U.S. dollar prices rose less than initially estimated. A mixed picture of underlying inflation did not alter the market’s outlook on Fed rate cuts timing.
Also, the Labor Department’s annual revisions showed a slight increase in the consumer price index (CPI) over October and November.

According to Steven Ricchiuto, chief economist at Mizuho Securities USA LLC in New York, the revisions won’t cause the Fed to cut rates.

We’re in a hurry, but we’re not in a hurry, says the Dollar Federal Reserve. It’s actually pretty good from their perspective,” he said.

Marc Chandler, chief market strategist of Bannockburn Global Forex in New York, says the widely anticipated revisions are more for economists than for the market.

This week saw a big move in the FX market. Last year, the market became too aggressive about how far and when the Fed would cut.

Fed officials signaled this week that no rate cut is urgently needed. Traders reduced their bets on how quickly the Bank of Japan (BOJ) would raise interest rates as a result of the message, which gave the dollar an extra tailwind.

Kazuo Ueda, the BOJ governor, believes easy monetary Dollar conditions will persist even after the central bank ends its negative interest rate policy next month.

In early trade, the yen was at 149.575 per dollar, its weakest since Nov. 27. The stock has fallen in value five out of six weeks, and is due for a 0.64% decline this week.

In his first public remarks since Jan. 19, Japanese Finance Minister Shunichi Suzuki said he was watching foreign exchange moves carefully. The warning was unfazed by traders.

In the U.S., Tuesday’s CPI report is the next major release.

The CME Group’s FedWatch Tool shows traders have all but ruled out a Fed cut in March, compared with a 65.9% chance a month ago. Around 60% of the Fed’s May meeting will result in a cut.

The pound rose 0.15% to $1.2635. Market wagers on early rate reductions have been resisted by European Central Bank and Bank of England officials this week.

As traders digested data suggesting the Swiss National Bank may be intervening in markets to weaken the Swiss franc, the franc weakened to 0.8747.

Following a $48,183 high earlier in the day, bitcoin rose 4.9% to $47,549.00.

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