The dollar rose sharply as investors held off on U.S. inflation next week on concerns of an economic slowdown and Fed rate hike sentiment. The dollar index, increased 0.156% to 103.35 after falling 0.25% in the previous session.
The index is poised for a weekly gain, its second consecutive positive week, and a run it hasn’t had since October. The euro fell 0.16% to $1.073 for a second week of losses. Meanwhile, the sterling was last at $1.2094, down 0.25% from Q4 GDP data the day before. Christopher Wong said the currency market would likely be different on Friday because of the lack of key data and Fed speakers.
Meanwhile, the yen dropped by 0.13% to $131.75. The Japanese government plans to present to the parliament on February 14 a candidate for the new governor of the Bank of Japan and two candidates for the deputy governor.
The country’s wholesale prices rose 9.6% in January from a year earlier, adding to growing signs of inflationary stress that could keep the central bank under pressure.
The Australian dollar was down 0.20% at $0.692. Meanwhile, the kiwi dropped by 0.24% at $0.631 against the U.S. dollar. The Fed said it saw signs of disinflation, but the blockbuster jobs report unnerved investors as they feared policymakers might stay on coattails for longer.
Fed reassures hopes of disinflation
In a week’s speech, Fed Chairman Powell reiterated his belief that disinflation was underway. Richmond Fed President Thomas Barkin said on Thursday that the US economy is slowing because of tighter monetary policy. This means the Fed can move more deliberately with any future interest rate hikes.
The yield on the 10-year Treasury note fell 1.6 basis points to 3.668%, not far from the one-month high of 3.692% it touched on Wednesday.
The closely watched part of the U.S. Treasury yield curve, which measures the gap between the 2-year and 10-year Treasuries, seen as a gauge of economic expectations, was at -82.52 basis points, inverting to -88 basis points. In this part of the yield curve, a deep inversion shows an impending recession. The focus is firmly on US CPI data next week as investors gauge whether disinflation is taking hold.
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