The US dollar rises as markets await inflation data today.

The dollar index climbed to around 104.2, continuing its gains from the previous session as investors anticipate a key inflation reading that could impact interest rate expectations.

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US Dollar

Australian Dollar

Japanese Yen

US Dollar

The core inflation rate is expected to decrease to 3%, the lowest level since June, while the core inflation rate is projected to slow to 3.8%, the lowest in two and a half years. Data from the Federal Reserve Bank of New York on Monday also showed that consumer inflation expectations for one year and five years remained unchanged at 3% and 2.5%, respectively. Simultaneously, robust US job data and hawkish statements from Federal Reserve officials supporting the view that interest rates are likely to remain high for an extended period. Markets now expect a total of 110 basis points of interest rate cuts by 2024, down from about 160 basis points at the end of last year.

Australian Dollar

The Australian dollar declines amid mixed data.

The Australian dollar dropped to around $0.65, stepping back from its recent highs as mixed economic data provided little support. Consumer confidence in Australia rose to its highest level in 20 months in February amid falling inflation and optimism that the Reserve Bank of Australia has concluded its tightening campaign. Meanwhile, business sentiment declined to below its long-term average in January. Regarding monetary policy, RBA Governor Michelle Bullock stated that it is not necessary for inflation to slow to 2.5% before the central bank moves to cut the cash rate. However, she also confirmed that the RBA has not ruled out another rate hike but has not ruled it in either.

Japanese Yen

Japanese Yen hits 11-week lows.

The value of the Japanese Yen dropped to around 149.5 against the US dollar, marking its lowest levels in 11 weeks as investors scaled back expectations for the size and pace of the Federal Reserve’s monetary easing cycle this year. Domestically, the currency also faced pressure from signals suggesting that the Bank of Japan will resist raising interest rates aggressively even if it decides to abandon negative interest rate policy. However, the central bank acknowledged that the likelihood of achieving the 2% inflation stability target was gradually increasing with the intensification of inflation and wage inflation cycles. Meanwhile, investors remained cautious as the yen approached the closely monitored 150 level, which could prompt Japanese authorities to intervene in the currency markets once again.

The US dollar rises as markets await inflation data today

The US dollar rises as markets await inflation data today

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