SINGAPORE- The dollar was poised just below this year’s high against the euro on Wednesday and it struck a five-week peak against the yen ahead of US inflation data, with the prospect a strong number could pressure the Federal Reserve to wind back policy support.
The greenback has enjoyed a lift from last week’s impressive US jobs data and from remarks by Fed officials about tapering bond buying and, eventually, raising rates, sooner than policymakers elsewhere.
Six straight sessions of gains against the euro sent the common currency to its lowest since late March on Tuesday. At around $1.1718 through the Asia session, the year’s low of $1.1704 is now within range. The dollar index, at 92.139, is at a three-week top and near its 2021 high of 93.439.
The inflation data may determine whether it tests those peaks, with a hot reading likely to stoke hike expectations and provide support, while downside surprise could reel those in.
The yen, which has dropped for five consecutive sessions against the dollar, fell marginally to 110.69 per dollar in early trade, its lowest since mid July. The dollar also touched a two-week high on sterling $1.3820 and held by a one-month high of 0.9234 Swiss francs.
“A stronger than expected print may add modestly to the dollar and (Treasury yields),” analysts at Maybank in Singapore said in a note.
“If the CPI print unexpectedly surprised to the downside, then the pullback in the dollar and Treasury yield may be asymmetrically larger than the upside risks.”
Economists polled by Reuters expect the pace of inflation to have eased slightly in July, with headline consumer prices rising 0.5 percent for the month compared with 0.9 percent a month earlier and the annual pace at 5.3 percent. . – Reuters
