TOKYO- The dollar held a three-day loss against major peers and traded near a one-month low to the yen on Wednesday, with highly anticipated US inflation data looming that could guide the timing of a Federal Reserve interest rate increase.
The dollar index, which measures the greenback against six rivals, was little changed at 93.997 after retreating gradually from a more than one-year peak at 94.634 reached Friday.
The currency was steady at 112.87 yen after dipping to 112.73 on Tuesday for the first time since Oct. 11.
The euro was also about flat at $1.15915, maintaining a three-day gain that has brought it close to the month’s high of $1.16165.
Economists polled by Reuters see October’s US consumer price index accelerating to 0.4 percent from the previous month’s 0.2 percent rise, with the closely watched year-on-year core measure gaining 0.3 percentage point to 4.3 percent, well above the Fed’s average annual 2 percent inflation target.
“We’ll need to see a print of 0.8 percent month-on-month to see the dollar index break out of the top of the range of 94.50,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.
Although the dollar has been trending lower against the yen, “if US CPI comes in hot then this poses a risk to USDJPY shorts,” he wrote.
Global inflation readings are under close scrutiny for evidence of whether rising price pressures are accelerating or showing signs of waning.
China’s October factory gate prices rose at the fastest pace since 1995, beating forecasts and further squeezing profit margins for producers grappling with soaring coal prices and other commodity costs.
Data on Tuesday showed US producer prices increased solidly in October, indicating that high inflation could persist amid tight supply chains related to the pandemic.
US Treasury real yields fell sharply as traders hedging against the possibility of rising prices scooped up Treasury Inflation Protected Securities (TIPS).
Analysts said the growing demand signaled inflation concerns are taking hold among a broader swath of investors and the public.
Fed officials on Tuesday said it was not clear that high inflation will become more entrenched than expected. – Reuters