Dollar slips ahead of US inflation data, still hits month high against yen

SINGAPORE  – The dollar dipped on Wednesday against most major currencies, with the exception of the yen, with investors expecting U.S. inflation data out later in the global day to hold some clue on how soon U.S. interest rates will peak.

Against a basket of currencies, the U.S. dollar index fell 0.07 percent to 102.05.

The euro was last 0.12percent higher at $1.0926 and sterling rose 0.02percent to $1.2430, with both currencies some distance away from their one-week lows hit on Monday.

The U.S. inflation data for March is forecast to come in at 5.2percent year-on-year, down from 6 percent previously, while core inflation likely ticked higher to 5.6 percent, according to a Reuters poll of economists.

“It could be the difference between a 25bp hike or pause at the Fed’s next meeting in May,” said Matt Simpson, senior market analyst at City Index, adding that money markets could “quickly revert to reprice a policy pause” if the inflation data comes in softer than expected.

Money markets are pricing in a roughly 74 percent chance that the Fed will raise rates by 25 basis points next month, though multiple rate cuts are also being priced in as early as July through to the end of the year.

A raft of Fed speakers on Tuesday offered little guidance on how much further U.S. interest rates would rise. New York Fed President John Williams said it depended on incoming data.

Philadelphia Fed Bank President Patrick Harker said he felt that the end of rate hikes may be near, while Chicago Fed President Austan Goolsbee said that the U.S. central bank should be patient about raising interest rates in the face of recent banking sector stress.

Banking turmoil sparked by the collapse of Silicon Valley Bank last month has added to bets that the Fed would not raise rates as high as previously feared in order to ease stress on the sector.

Against the yen, the dollar rose to a nearly one-month high of 134.045, a reflection of the stark contrast between the Fed’s aggressive monetary policy tightening cycle and the Bank of Japan’s (BOJ) ultra-loose policy.

The International Monetary Fund said in its global financial stability report released on Tuesday that the Bank of Japan could help prevent abrupt policy changes later by allowing more flexibility in its yield curve control policy.

Elsewhere, the Aussie rose 0.32 percent to $0.6675, while the kiwi gained 0.19 percent to $0.6204.

In cryptocurrencies, bitcoin slipped marginally to $30,001, holding above the key $30,000 level after breaching it for the first time in 10 months on Tuesday.

Ether, the second largest cryptocurrency, stood at $1,867.90.