Dollar consolidates gains as US inflation data awaited
The dollar consolidated gains yesterday, a day after posting its biggest single-day rise in six weeks as markets looked forward to US inflation data that will determine the near term trading outlook for the struggling greenback.
With short bets against the dollar stuck near record highs despite this week’s rally, any upside inflation surprise might trigger a broad-based pull-back in positioning.
“We view this dollar move higher as broadly a corrective move and now the question is how much the dollar can recover before the data,” said Viraj Patel, an foreign exchange strategist at ING in London. Worries
The dollar, which slid to a 10-month low of 107.32 yen last week on worries over Hurricane Irma and North Korea, has climbed this week as risk sentiment improved and US Treasury yields edged higher.
The dollar was trading 0.1 per cent lower against a broad basket of currencies at 92.416 in early trades yesterday. It rose 0.7 per cent on Wednesday, its biggest daily rise since August 4, according to Thomson Reuters data. The US core consumer price index is expected to have risen 1.6 per cent on an annual basis in August, which would be the lowest since early 2015, versus 1.7 per cent in July.
The Federal Reserve has a two per cent inflation target, and a series of subdued price readings have dampened expectations for the Fed to raise interest rates again this year and weighed on the dollar.
“We don’t believe the market is looking for a particularly strong CPI number today but risk of any upward inflation surprise has been very under-priced,” Credit Agricole strategists said in a note.