The Dollar Rises As US Inflation Data Weighs In On Rates

(CTN News) – The dollar fell on Friday as hotter-than-expected inflation data stoked worries about when the Federal Reserve will cut interest rates this year.

The US Dollar producer price index for final demand rose 0.6% in February, more than economists predicted. Consumer prices increased strongly in February for the second consecutive month, according to figures released Tuesday.

It is expected that interest rates won’t change at the US central bank’s meeting next week, but investors will be closely watching the Fed’s economic projections and comments from chair Jerome Powell.

As a result of sticky inflation reports, traders now expect the Fed to cut rates by 60% in June, compared to 74% a week earlier, according to CME FedWatch.

Inflation control in the United States might not be as easy as progress made to date, according to Ryan Brandham, Validus Risk Management’s global capital markets head for North America.

In addition to pushing back any 2024 interest rate cuts, it could give the Fed even more reasons to delay them.”

In December, the Fed predicted 76 basis points of cuts in this year, which traders are now pricing in.

After rising 0.55% on Thursday, the dollar index moved up 0.058% to 103.44. In its first week of gains in four, the dollar index is projected to rise by 0.7% for the week.

A 0.04% drop in the euro led to a 0.10% drop in sterling to $1.2738.

In Asian hours, 10-year Treasury yields eased to 4.284% from 10.6 basis points on Thursday.

As a result of the uncertainty surrounding the Bank of Japan’s policy movement, the Japanese yen is on course for a nearly 1% weekly decline, the steepest weekly decline since January.

In a report published Thursday by Jiji news agency, the BOJ has begun making preparations for ending its negative interest rate policy on March 18-19.

There will be preliminary results of Japan’s spring wage negotiations on Friday, with several of the country’s largest companies already agreeing to pay increases demanded by unions.

Carol Kong, a Dollar currency strategist at Commonwealth Bank of Australia, says a strong shunto wage outcome is the last evidence the BOJ will gradually unwind its ultra-easy policy.

“We expect a result above last year’s 3.58% to support a near-term BOJ policy exit and a rise in the JPY.”

As for other currencies, the Australian dollar fell 0.18% to $0.657, while the New Zealand dollar fell 0.39% to $0.611.

In cryptocurrencies, bitcoin last traded at $71,959, up 1.82% from Thursday’s record high of $73,803. At $3,895.40, Ethereum rose 1.41%.

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