Dollar stuck near 5-month low as caution reigns ahead of U.S. CPI, ECB tests

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TOKYO — The dollar continued to hover

near a five-month low versus major peers on Thursday as

investors looked to key U.S. inflation data and a European

Central Bank meeting later in the day to potentially set the

direction for currency markets.

Investors have adopted a wait-and-see attitude all week,

sucking volatility from the market and leaving major currencies

mostly range-bound.

The dollar index has fluctuated narrowly around the

psychologically important 90 level, and was last at 90.137.

The euro rose to a one-week high at $1.2218 on

Wednesday only to finish little changed, and was essentially

flat at $1.2178 in Asia.

The yen traded at 109.62 per dollar, also little

changed from Wednesday and near the middle of the 109.19-110.325

range of the past two weeks.

Deutsche Bank’s Currency Volatility Index

languished at its lowest level since February 2020.

The U.S. Labor Department’s consumer prices data has been

much anticipated after last month’s report showed consumer

prices increased by the most in nearly 12 years in April.

That has stoked bets that higher prices could last longer

than some anticipate, potentially calling into question the

Federal Reserve’s insistence that current inflation pressures

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are transitory and monetary stimulus should stay in place for

some time yet.

Economists polled by Reuters estimated the CPI advanced 0.4%

in May.

While the greenback has kept to tight ranges in the run-up

to the report, benchmark 10-year Treasury yields –

which helped drive the dollar index to a multi-year high earlier

this year – has taken a sizeable step lower in the past week and

was at 1.4874% in Asia from as high as 1.6350% on Friday.

“It feels like the balance of risk is tilted to the upside

on U.S. CPI versus the consensus, which would favor a sell-off

in Treasuries – (and thus) higher yields – and subsequently a

stronger USD,” Chris Weston, head of research at brokerage

Pepperstone in Melbourne, wrote in a note to clients.

“Bonds seem overbought.”

With the ECB, investors will be watching for any clues of an

imminent slowdown to its bond-buying program.

While the ECB is widely expected to keep policy settings

steady, the euro could be sensitive to changes in the bank’s

economic forecasts or any signal that the pace of bond buying

could be reduced in months ahead.

In crypto markets, bitcoin held gains from its

biggest rally in four months on Wednesday, when it jumped nearly

12%. It last traded little changed at $37,097.02, after

rebounding from a three-week low of $31,025 hit on Tuesday when

signs of institutional investor caution and regulatory attention

drove selling.

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Currency bid prices at 0049 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.2175 $1.2179 -0.02% -0.34% +1.2181 +1.2176

Dollar/Yen 109.5900 109.6450 -0.03% +6.12% +109.6750 +109.6150

Euro/Yen

Dollar/Swiss 0.8961 0.8960 +0.01% +1.28% +0.8962 +0.8958

Sterling/Dollar 1.4111 1.4114 +0.00% +3.30% +1.4115 +1.4110

Dollar/Canadian 1.2119 1.2110 +0.09% -4.82% +1.2119 +1.2108

Aussie/Dollar 0.7724 0.7731 -0.08% +0.42% +0.7731 +0.7724

NZ 0.7168 0.7178 -0.13% -0.18% +0.7178 +0.7168

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Kevin Buckland; Editing by Christopher Cushing)

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