Dollar Wavers, Markets Wary of CPI
The US dollar slipped in European trading on Monday (July 13th) after strengthening earlier in the session due to escalating tensions in the Gulf region. Investors were still monitoring the latest conflict between the United States and Iran, but the dollar's initial gains began to fade as markets awaited US inflation data and the Fed's policy direction.
The euro strengthened 0.15% to US$1.1433, while the pound sterling held steady around US$1.339. The Australian dollar edged down 0.1% to US$0.694. The US dollar index, which measures the greenback against six major currencies, rose as much as 0.3% but later weakened 0.2% to 100.83.
Market sentiment remains affected by missile and drone attacks between the United States and Iran over the weekend. Iran reportedly targeted US facilities in several Gulf states and reiterated its assertion that the Strait of Hormuz was closed. This situation caused oil prices to rise and rekindled concerns about global inflation.
Market participants now estimate a roughly 50% chance that the Fed will raise interest rates two or more times by the December meeting. This week's main focus is on the release of US CPI data on Tuesday, PPI data the following day, and Fed Chairman Kevin Warsh's testimony before the US House of Representatives and Senate.
Meanwhile, the Japanese yen weakened again against the US dollar. USD/JPY rose 0.2% to 162.05, renewing market participants' vigilance over potential intervention by Japanese authorities. The yen remains near its weakest level in 40 years, thus maintaining continued pressure on the Japanese currency.
The yen's weakening occurred after a Reuters report indicated that the Japanese government has no immediate plans to change the asset allocation of its state pension fund. Previously, the yen strengthened after Finance Minister Satsuki Katayama said the government would encourage pension funds, including the GPIF, to invest more in domestic financial assets. However, government sources said the plan would not immediately change GPIF's medium-term targets.
Consequently, the US dollar remains potentially volatile as the market awaits inflation data and the Fed's signal. If the CPI is higher than expected, the dollar could strengthen again as the likelihood of an interest rate hike increases. Meanwhile, the yen remains vulnerable to pressure as long as there is no concrete action from the Japanese government or the Bank of Japan. (arl)
Source: Newsmaker.id
