SINGAPORE – The dollar held steady on Tuesday, while the yen wobbled, drifting away from one-month highs as market participants prepared for upcoming U.S. inflation data and reassessed expectations for Federal Reserve rate cuts.
The dollar was largely unchanged at 143.10 yen, slightly retreating from earlier gains but staying above the one-month low of 141.75 hit on Friday. The greenback had fallen 2.7% against the yen last week. The dollar index, which tracks the U.S. currency against six major rivals, stood at 101.61 after rising 0.4% on Monday.
Market expectations for a Federal Reserve rate cut are mixed. While a weaker-than-expected inflation report could fuel hopes for a 50-basis-point cut, a steady reading might keep the debate between a 25 or 50 bps cut unresolved. Currently, markets fully price in a 25 bps cut next week, with a 30% chance for a 50 bps cut, down from 50% on Friday, according to the CME FedWatch tool. For 2024, traders anticipate around 110 bps of easing.
Charu Chanana, head of currency strategy at Saxo, noted, “Overall, the USD is expected to trade sideways to higher, as current Fed easing expectations still appear excessive.”
China’s yuan edged slightly lower but was supported by better-than-expected export data. However, imports fell short of forecasts, rising just 0.5%, highlighting weak domestic demand.
Investor focus also shifts to the U.S. presidential debate scheduled later on Tuesday, which may impact the November election outlook.
In European currencies, the euro was last at $1.1039, having fallen nearly 0.5% on Monday. Traders are eyeing Thursday’s European Central Bank (ECB) policy meeting, where another rate cut is widely anticipated. The ECB is expected to ease by 63 bps this year.
The British pound last traded at $1.307, after hitting a near three-week low of $1.3058 earlier in the session. Upcoming labor and wage data could influence Bank of England (BoE) policy moves, with expectations for 47 bps of easing in 2024.
In other currencies, the Australian dollar was at $0.66655, close to a three-week low, while the New Zealand dollar stood at $0.6148, near its recent low.
As markets await key economic data and central bank meetings, currency movements remain cautious and volatile.
hii Aditi Sahu this side..
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