Dollar falls amid inflation focus

The dollar fell on Tuesday as investors awaited an expected inflation report, while the yen gained ahead of the expected appointment of the Bank of Japan’s next governor, Kazuo Ueda.

Markets look to U.S. CPI data for clues about the Fed’s policy outlook. The number should rise 0.53% in January after falling 0.12% in December.

The dollar index was down 0.018% at 103.18, having fallen 0.35% overnight. In February, the index rose by 1.4%.

The Federal Reserve raised interest rates by 25bps earlier this month. It said it was finally trying to fight inflation.

Currencies

The euro rose 0.12% to $1.0732, gaining 0.436% in the previous session.

Sterling last traded at $1.2149, up 0.122% on the day after gaining 0.62%.

The Australian dollar added 0.04% to $0.698, while the kiwi gained 0.26% to $0.636.

The Japanese yen gained 0.23% to $132.12, down 0.72% compared to the previous session. The Japanese currency fell sharply to a 32-year low of $151.93 last year as U.S. rates increased and Japanese rates stayed near zero. However, it has since recovered those losses as the Fed tries to stop its tightening while speculation grows that the BOJ will move.

Data on Tuesday showed Japan’s economy avoided a recession but recovered less than expected in the October-December period as business investment eased. This signaled an exit from the stimulus will be a challenge for the BOJ.

Eurozone GDP growth slowed in the final months of 2022 but remained in positive territory.

According to Eurostat, GDP in the 19 countries that share the euro at the end of 2022 grew by 0.12% quarter-on-quarter, up from 1.9% year-on-year. That was in line with a January 31 preliminary estimate that showed the eurozone had avoided the technical recession that had been predicted.

A flash estimate showed that employment in the eurozone rose 0.42% in the last quarter. This was twice as fast as economists expected.