Dollar Eases on Speculation of Central Bank Actions
The dollar eased on Friday as it headed for a fourth week of gains while traders reduced their bets on how quickly the Bank of Japan might raise interest rates and how soon the Federal Reserve will cut them. Traders shrugged off revised U.S. monthly consumer prices that rose less than initially estimated in December. While underlying inflation remained a bit warm, the mixed picture did not alter the market’s outlook on the timing of Fed rate cuts.
The annual revisions published by the Labor Department also showed the consumer price index (CPI) increasing slightly more than previously reported in October and November. Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York, stated that the revisions will not lead to a Fed rate cut as the market is in a rush while the Fed is more cautious and sees the current state of the economy as favorable. The dollar index fell to 104.04, while the euro rose to $1.0785.
Fed officials reiterated this week that there is no pressing need to cut rates, which gave the dollar an extra boost. The yen weakened to a 10-week low as traders scaled back their expectations of the Bank of Japan raising rates. BOJ Governor Kazuo Ueda stated that easy monetary conditions could persist even after the central bank ends its negative interest rate policy. The yen traded at 149.32 per dollar, its weakest level since November. Japanese Finance Minister Shunichi Suzuki expressed caution about currency moves.
The market is eagerly awaiting the release of the U.S. Consumer Price Index (CPI) for January. Traders have largely ruled out a rate cut at the Fed’s next policy meeting in March but see a possibility of a cut in May.
Sterling and Euro Show Resilience
Sterling rose against the dollar, showing resilience alongside the euro. Officials from the European Central Bank and Bank of England have pushed back against market expectations of early rate reductions. The Swiss franc weakened as traders considered the possibility of intervention by the Swiss National Bank to weaken the currency. Bitcoin showed strong gains, reaching $48,183 before settling at $47,549.