Dollar Hovered Near a Five-Month Low Against Main Peers

The U.S. dollar was close to its lowest point in five months versus major peers on Thursday, as investors looked to U.S. inflation data as well as a European Central Bank (ECB) meeting later in the day. Investors would like to learn more about currency markets. They adopted a wait-and-see attitude all week, sucking volatility from the market and leaving main currencies mostly range-bound.

The dollar index fluctuated narrowly around the psychologically significant 90 level. It stood at 90.206, not far from last month’s low of 89.533, a level not seen since early January.

The euro rose to a one-week high at $1.2218 one day earlier, only to finish little changed. It was mostly flat at $1.21635 in Asia.

Another main currency yen traded at 109.565 per dollar. It did not change much from Wednesday and near the middle of the 109.19-110.325 range of the past two weeks.

Dollar, investors and authorities

Investors are looking for the U.S. Labor Department’s consumer prices data. Consumer prices increased by the most in nearly 12 years in April, according to the report. That factor stoked bets that higher prices could last longer than some people expected. The Federal Reserve insists that current inflation pressures are transitory and monetary stimulus should stay in place. But consumer prices data has the potential to undermine the central bank’s position.

Analysts who work for Westpac side with the Federal Open Market Committee’s (FOMC) position in the inflation debate. They don’t expect a taper of the central bank’s asset-purchase program until the second half of the year.

Westpac analysts forecast the dollar index will decline to 87.30 at that time, before then grinding higher again due to U.S. monetary policy. The main goal of FOMC is to reach “maximum employment”. The committee is ready to do whatever it takes to accomplish its goal.

In the case of the ECB, investors will be watching for any clues of an imminent slowdown to its bond-buying program. The ECB is expected to keep policy settings steady. The single currency 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 cryptocurrency markets, bitcoin held gains from its biggest rally in several months on Wednesday. Bitcoin rose nearly 12% on Wednesday. The best-known cryptocurrency last traded largely unchanged at $36,709.67.