The dollar found support on Thursday from emerging views the Federal Reserve is slowly but surely edging towards a discussion about tightening monetary policy, and as traders await crucial U.S. inflation data this week.
In a market heavily short dollars, the mere suggestion of tapering is enough to temper further selling and against the euro and the yen the dollar held late Wednesday gains early in the Thursday Asia session.
The euro traded at $1.2185 and the yen at a one-week low of 109.20 per dollar. Sterling also dipped to a week-low of $1.4150.
U.S. yields rose overnight, with the benchmark 10-year Treasury yield up 1.7 basis points to 1.5808%. The U.S. dollar index followed suit and lifted 0.4% on Wednesday, holding there on Thursday at 90.076.
Economists expect core PCE prices to jump 2.9% year-on-year in April, compared with a year-on-year rise of 1.8% a month earlier. The data is published on Friday.
Wait-and-see
The latest fretting about inflation was triggered when data in mid-May showed April U.S. CPI running at an annual clip of 4.2% - juiced by the low base of the pandemic year, but still well above forecasts for 3.6%.
It has given dollar bears pause for thought, stalling a downtrend in the dollar index and hemming most majors into ranges while the world awaits more data to learn whether the lift is transitory.
· Cryptos turn choppy as bounce momentum ebbs
Cryptocurrencies slipped on Thursday but without falling through recent lows, as enough traders clung to hopes that the asset class can claw its way back from last week’s plunge.
Bitcoin dropped 4% in Asia to about $37,600 and the next biggest crypto token, ether, was down 7.5% at $2,676 - leaving both well above deep week-ago troughs but miles shy of the record highs they scaled in April.
· J.P. Morgan’s Gabriela Santos on markets and inflation
Gabriela Santos, J.P. Morgan Asset Management global market strategist, joins ‘Closing Bell’ to discuss markets and inflation, adding that inflation will moderate to 2% as the year goes on.
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