Dollar Up, Inflation Remains on Investors’ Minds

Dollar Up, Inflation Remains on Investors’ Minds
© Reuters.

By Gina Lee – The dollar was up on Thursday morning in Asia but continued to hover near two-week lows. Weaker-than-expected U.S. inflation and a promise from the Federal Reserve to keep interest rates low continued to raise investor expectations of meagre returns from the U.S. currency.

The that tracks the greenback against a basket of other currencies inched up 0.01% to 90.415 by 9:53 AM ET (2:53 AM GMT). The index dropped to a two-week low of 90.249 after the release of the U.S. inflation data.

The pair inched up 0.03% to 104.60.

The pair inched up 0.03% to 0.7723, with the AUD just below the two-week high against the dollar touched during the previous session. The pair inched down 0.06% to 0.7209.

The pair was up 0.37% to 6.4582.

The pair inched up 0.05% to 1.3834. The pound was also boosted by diminishing expectations for negative interest rates in the U.K. and climbed towards a nearly three-year high.

In Asia, moves were slight in Japan and China, with both markets closed for holidays.

released on Wednesday showed that the was flat month-on-month, against the predicted 0.2% growth and the 0.1% growth recorded in December.

Fed Chairman Jerome Powell also noted that unemployment was still high, and re-iterated that the central bank’s new policy framework could accommodate annual inflation above 2% for some time before hiking rates, in his speech on Wednesday.

“In other words, easy policy is going to stay there for a long, long time, and that should be negative for the U.S. dollar,” Westpac currency analyst Imre Speizer told Reuters.

“I think it’ll be something that sits in the background, as just a reminder that the U.S. dollar can’t go up while it’s got that easy policy relative to everybody else,” Speizer added.

Inflation remains a concern, with predictions that pent-up demand and a low-base effect from 2020’s shocks will drive jumps in headline figures by spring. Such a scenario could test the Fed’s resolve.

Investors looked to New Zealand, where COVID-19 is firmly under control, but surging housing prices have pushed inflation above expectations. Investors have pared back further rate cut expectations in response.

“The Reserve Bank of New Zealand (RBNZ) arguably face quite a different communication challenge (to the Fed), with the demand pulse in New Zealand in a much better position than anyone dared hope,” ANZ Bank analysts said in a note.

“RBNZ will welcome this but continue to highlight the need for cautious patience,” the note added.

In Europe, investors await the release of the , due later in the day.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.