TOKYO- The dollar was steady against a handful of peers on Wednesday as investors assessed calls for patience from Federal Reserve officials and awaited Fed meeting minutes for more insight on the central bank’s rate path.
The kiwi alone stood out against the calm, leaping after the Reserve Bank of New Zealand lifted its forecasts for peak interest rates at its latest monetary policy meeting.
With little else to drive the market in terms of economic data this week, major currencies continued to move in a tight range.
Investors have largely been shoring up US rate cut bets after a milder inflation reading last week, even as Fed officials continued to sound a cautious note.
Fed Governor Christopher Waller said overnight that he would need to see several more months of good inflation data before he would be comfortable supporting rate cuts.
That timeline was echoed by Cleveland Fed President Loretta Mester.
Markets now have about 43 basis points (bps) of easing priced in for this year versus last week’s 52 bps.
Still, Waller’s comments gave the market little new to go on, said Kyle Rodda, senior financial market analyst at Capital.com.
“He basically told us that if inflation comes down, the Fed will cut … One implies the other and doesn’t say anything about whether inflation and rates will come down.”
While markets remain hopeful that US inflation will continue to cool, PCE data due on May 31 will be a crucial test for confirming those expectations, he added.
The dollar index was mostly flat against a basket of currencies at 104.65, after popping up briefly to 104.76 overnight.
Ahead of next week’s data, the market will get minutes of the Fed’s April 30-May 1 monetary policy meeting, which market players will scrutinize for any “dovish or hawkish undertones masked by the consistency of Fedspeak,” said Andy Ji, senior Asia FX analyst at InTouch Capital Markets.
