Dollar hangs near 5-week high as inflation data looms; yen slips

TOKYO  – The dollar hovered near a five-week high against major peers on Monday on rising bets for prolonged Federal Reserve policy tightening ahead of a crucial consumer price report the following day.

The yen slipped with the government set to nominate a candidate who backs the current policy settings as the new Bank of Japan governor on Tuesday.

The risk-sensitive Australian and New Zealand dollars eased with Asian equities on worries that higher U.S. rates will choke growth. Sterling also retreated.

“The dollar has been well supported since the much-stronger-than-expected U.S. jobs data earlier this month, and Fed comments have leaned more to the hawkish side, but of course the focus is tomorrow’s CPI,” said Shinichiro Kadota, senior FX strategist at Barclays in Tokyo.

“I think the market is more worried about upside risks to inflation, rather than downside risks.”

Ahead of Tuesday’s CPI report, revisions to the previous data set showed consumer prices rose in December instead of falling as previously estimated.

Separately, the University of Michigan surveys showed a one-year inflation outlook of 4.2 percent, higher than the final number in January. Fed Chair Jerome Powell has cited the Michigan survey as one of the indicators the U.S. central bank tracks.

The dollar index – which measures the greenback against six counterparts including the yen, euro and sterling – added 0.068 percent to 103.65, keeping close to last Tuesday’s high of 103.96, the strongest level since Jan. 6.

The U.S. currency gained 0.18 percent to 131.63 yen, although well within the range of the past week of 129.80 to 132.90.

Sources said on Friday that former BOJ board member Kazuo Ueda is set to become the next governor. In an interview the same day, he said it was appropriate for the BOJ to maintain its current ultra-easy policy.

The euro eased 0.06 percent to $1.0669, while sterling was last trading at $1.2044, down 0.12 percent on the day.

The Aussie fell 0.13 percent to $0.6910, and New Zealand’s kiwi lost 0.08 percent to $0.6306.