TOKYO: The dollar continued to rise on Tuesday as markets awaited signals on a possible interest rate cut from the Federal Reserve, expected later this week.
The yen narrowed its decline from a day earlier, when weaker-than-expected Japanese economic data raised hopes that the government would step up stimulus. The Australian dollar weakened slightly following the release of the Reserve Bank of Australia’s February meeting minutes.
Trading was thin as many markets in Asia were closed following the Lunar New Year holiday and the US President’s Day holiday. Key economic events will occur later in the week, with the release of minutes from the Fed’s last meeting and advance statistics on US gross domestic product.
“We’re pretty positive about the U.S. economy,” said Christina Clifton, senior currency strategist at Commonwealth Australia Bank in Sydney. “The market is currently pricing in a high probability of a June rate cut, and that is our view. However, we differ from the market in that we expect another rate cut in July.”
“We judge that the most important driver for the dollar through 2026 will be the story of American exceptionalism,” he added.
The dollar index, which measures the greenback against a basket of currencies, was little changed at 97.12, after rising 0.2% in the previous session. The euro fell 0.06% to $1.1843.
The yen rose 0.15% to 153.28 yen to the dollar. The pound fell 0.07% to $1.3616.
Friday’s data showed that U.S. consumer prices rose less than expected in January, giving the Fed room for further policy easing this year.
Money market traders are pricing in 62 basis points of easing for the rest of the year, implying two quarter-point rate cuts and a third cut of about 50%. The next rate cut is likely to occur in June, with the market seeing an 80% chance of a 25 basis point cut.
The Federal Open Market Committee will release the minutes of its January meeting on Wednesday. Other important data this week includes inflation rates in the UK, Canada and Japan, as well as Friday’s preliminary figures on global business activity.
The yen’s recent gains stalled on Monday, as official figures showed Japan’s economy barely grew in the last quarter, growing at an annualized rate of 0.2%.
The Australian dollar fell 0.07% against the US dollar to $0.7064. New Zealand’s kiwi fell 0.08% to $0.6026 ahead of Wednesday’s Reserve Bank of New Zealand policy meeting. It is widely expected that interest rates will remain unchanged at this meeting.
Australia’s central bank has concluded that without rate hikes like this month’s, inflation will remain high and it remains to be seen whether further tightening is needed.
Minutes of the RBA’s board meeting last month showed members were concerned that the risks to their inflation and employment obligations were “significantly changing”.
Among cryptocurrencies, Bitcoin rose 0.05% to $68,881.72, while Ether was little changed at $1,999.11.
(Reporting by Rocky Swift; Editing by Thomas Derpinghaus)
