TOKYO- The dollar index hovered at a one-month high against a basket of currencies on Wednesday as remarks by Federal Reserve Governor Christopher Waller dampened expectations for a March rate cut.
Meanwhile, China’s offshore yuan inched up after data showed the world’s second largest economy grew enough in the fourth quarter in 2023 to meet the country’s annual growth target.
In Fed news, Waller said that while the US is “within striking distance” of the Fed’s 2 percent inflation goal, the central bank should not rush towards cuts in its benchmark interest rate until it is clear lower inflation will be sustained.
Market expectations of a rate cut in March have eased to a 62.2 percent chance versus an 76.9 percent view in the prior session, according to CME’s FedWatch Tool.
While the market’s latest pricing brings the Fed rate curve into more sensible territory, “with 157 basis points of rate cuts still priced in for 2024, there is room for this to ease back,” said Tony Sycamore, market analyst at IG.
Remarks by European Central Bank (ECB) President Christine Lagarde later on Wednesday could bring further repricing, he added.
“Rate cuts are coming but not as soon as some might be hoping for,” Sycamore said.
The dollar index a measure of the greenback against a basket of major currencies, last stood at 103.32 after climbing as high as 103.42 during the previous session, its highest level since Dec. 13. Tuesday also saw the dollar’s biggest one-day percentage gain since Jan. 2.
In China, official data showed the economy grew 5.2 percent in the fourth quarter from a year earlier, slightly missing analysts’ expectations but still making it possible for Beijing to meet its annual growth target despite a shaky start to the year.
The offshore Chinese yuan ticked up slightly to 7.2092 per dollar immediately after the data release.
