Dollar sellers hit pause for US inflation data
TLT•The dollar held firm on Tuesday ahead of US inflation data, after a slide on Monday reversed some of Friday’s gains. Markets priced an 85% chance of a Federal Reserve rate increase next month, with October headline inflation expected at 3.9% and core inflation at 2.8%.
1. Dollar steadies before CPI
The dollar found support on Tuesday after a bumpy few days, as investors awaited US inflation data that analysts said could lift it further if rate-hike expectations strengthen. A tumble in oil prices and gains for stocks had weighed on the dollar on Monday. The Australian dollar rose nearly 1% that day to $0.6918, while the New Zealand dollar reached $0.5634.
2. Rate expectations in focus
Markets priced an 85% chance of a Federal Reserve rate increase next month after Friday’s jobs report showed hiring more than twice forecasts. October headline inflation is expected to reach 3.9%, with core inflation at 2.8%, year on year; analysts said a higher reading could add to rate-hike expectations and lift the dollar. Markets have priced two US hikes by the middle of next year.
3. Other currencies hold ranges
The euro rose 0.7% on Monday to $1.1220, reversing its Friday decline and leaving it near the middle of a month-long range against the dollar. Sterling traded at $1.3441, while the yen hovered at 158 per dollar. Japan sold $97 billion in reserves to defend the yen through late July and August, figures released Monday showed.
