Dollar Pares Drop Seen After Softer Core CPI
A Bloomberg gauge of the dollar pared losses it incurred following the release of softer-than-expected US core consumer inflation data. The yen jumped more than 1% versus the greenback, extending gains seen in Asian trading after comments from Bank of Japan Governor Kazuo Ueda.
The Bloomberg Dollar Spot Index falls as much as 0.5%, then pares decline to less than 0.1%
Headline CPI rose 0.4% MoM as expected; core CPI increased 0.2% versus 0.3% forecast
“The economy left to itself is just chugging along. Steady growth, unemployment very steady and inflation gradually coming down,” David Kelly, chief global strategist at JPMorgan Asset Management, told Bloomberg TV
“Plenty of dip buyers,” Brad Bechtel, global head of foreign exchange at Jefferies, said as the dollar eased losses. “Real money hedgers that have USD risk are feeling overhedged, and those that have foreign currency risk are feeling underhedged, and they seem to be quite active on these oscillations”
Treasury yields in the three to 10-year sectors fell at least 10bp on session.
Yen set for best day since Nov. 29; USD/JPY falls as much as 1.3% to 155.95 low. weakest mark this year, before easing drop.
Governor Kazuo Ueda said he heard encouraging views on wages during new-year events by various industries and the central bank’s recent branch managers’ meeting.
Deputy Ryozo Himino suggested an interest-rate hike may happen next week.
Swaps traders are pricing about a 70% chance of a hike on Jan. 24, up from some 40% at the beginning of the year.
“Barring any significant negative economic surprises around Trump’s inauguration on Jan. 20 or possible riskoff movement toward the policy meeting, the BOJ is likely to decide on a rate hike next week,” Nomura’s economics research team writes in a note.
EUR/USD reverses gains, falls 0.3% to 1.0281; USD/CHF gains less than 0.1% to 0.9129.
GBP/USD erases rise, slips less than 0.1% to 1.2213.
Earlier, the currency pair whipsawed after data showed UK inflation unexpectedly cooled for the first time in three months in December.
Source : Bloomberg
