TOKYO- The dollar traded close to a two-week high versus the yen on Wednesday ahead of a highly anticipated reading of US inflation that could provide clues on the pace of Federal Reserve interest rate cuts.
The Australian dollar sagged near a four-month low after a dovish tilt to the central bank’s policy outlook a day earlier. That also weighed on New Zealand’s kiwi, which languished near a one-year trough.
Investors will also watch headlines from China’s closed-door Central Economic Work Conference, which runs this week.
The anitipodean currencies got a boost at the start of the week after Beijing pledged more fiscal and monetary support for the economy next year, although that was overshadowed by Tuesday’s Reserve Bank of Australia dovish statement. RBA Deputy Governor Andrew Hauser is due to speak later on Wednesday.
The dollar eased 0.12 percent to 151.80 yen but remained close to the overnight peak of 152.18 yen, its strongest level since Nov. 27.
The dollar index which measures the currency against the yen and five other major peers, was steady at 106.36, after rising to a one-week high of 106.63 in the previous session.
Traders currently assign 85 percent odds to a quarter-point rate cut by the Fed on Dec. 18.
Economists expect both headline and core consumer prices to have risen 0.3 percent in November, from previous increases of 0.2 percent and 0.3 percent, respectively. “Should this scenario materialize, there could be concerns that the Federal Reserve may not be able to cut rates as quickly as hoped, potentially benefiting the US dollar,” said James Kniveton, senior corporate FX dealer at Convera.
