On Friday, the dollar eased slightly as it poised for a fourth consecutive week of gains, with traders adjusting their expectations regarding the timing of interest rate adjustments by the Bank of Japan and the Federal Reserve.
Despite the revised U.S. monthly consumer price index figures for December showing a smaller increase than initially projected, traders remained largely unmoved. The market’s perception of the Federal Reserve’s rate cut timeline remained unchanged. While underlying inflation remained somewhat elevated, the nuanced data did little to alter expectations.
Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC, noted that the revisions to the consumer price index were unlikely to prompt the Fed to consider rate cuts. He emphasized that the market’s urgency was not necessarily mirrored by the Fed’s perspective, which viewed current economic conditions favorably.
The dollar index experienced a marginal decline of 0.07 percent to 104.04, while the euro gained 0.08 percent to $1.0785.
According to Marc Chandler, chief market strategist at Bannockburn Global Forex, the anticipated revisions primarily interested economists and had minimal impact on the market. He suggested that recent fluctuations in the foreign exchange market were likely a consolidation following significant movements earlier in the week, influenced by overly aggressive predictions regarding Fed rate cuts.
Federal Reserve officials reiterated this week that there was no immediate need for rate cuts, further bolstering the dollar’s position. Consequently, traders reduced their expectations of the Bank of Japan’s rate hike timeline.
BOJ Governor Kazuo Ueda indicated that accommodative monetary policies could persist even after the cessation of the bank’s negative interest rate policy, anticipated as early as next month. The yen experienced minimal fluctuations, with Japanese Finance Minister Shunichi Suzuki expressing vigilance over FX movements.
Looking ahead, the next significant U.S. data release is the Consumer Price Index for January scheduled for Tuesday. Traders have largely discounted the possibility of a rate cut at the Fed’s next policy meeting in March, contrasting with earlier expectations.
In the currency markets, sterling rose slightly to $1.2635, while the euro and pound demonstrated resilience, prompted by statements from the European Central Bank and Bank of England officials pushing back against premature rate cut speculations.
The Swiss franc weakened against the dollar, with the latter appreciating about 0.93 percent against the safe-haven currency for the week. Meanwhile, Bitcoin exhibited a 4.9 percent increase, reaching $47,549.00, after hitting a high of $48,183 earlier.