TOKYO, 12th June, 2024 (WAM) -- The dollar steadied on Wednesday after hitting a four-week high against peer currencies overnight as market players awaited key U.S. inflation data and the Federal Reserve's updated economic projections due later in the day, Reuters reported.
The U.S. dollar has rebounded after Friday's stronger-than-expected jobs report raised the prospect of inflation remaining sticky while growth stays strong, making the U.S. central bank less likely to cut rates in the coming months.
Markets are pricing in a roughly 56 percent chance of a cut in September, according to the CME FedWatch tool, down from 77.8 percent one week ago.
CPI report
Investors will have a chance to assess the inflation situation when U.S. Consumer Price Index numbers are released at 18.30 GMT (22.30 UAE) on Wednesday, just hours before the Fed concludes its two-day policy meeting.
Economists polled by Reuters expect headline consumer price inflation to ease to 0.1 percent from 0.3 percent last month, and core price inflation to remain steady on the month at 0.3 percent.
Meanwhile, the Fed is widely seen holding rates at 5.25 percent to 5.5 percent, putting the focus on policymakers' updated economic projections known as the "dot plot" and Chair Jerome Powell's news conference for clues regarding the timing and pace of cuts.
Dollar index
The dollar index, which measures the greenback against a handful of other major peers, firmed at 105.29, after touching its strongest level since 14th May at 105.46 overnight.
The euro held steady at US$1.073675, keeping off Tuesday's low of US$1.07195, its weakest level since 2nd May.
Sterling was flat at US$1.2739 ahead of UK gross domestic production figures for April.
During Asian trading hours, data showed China's consumer inflation rose at a steady pace in May, while producer price declines narrowed slightly, adding to signs that government efforts to prop up the economy were starting to bear fruit.
The offshore Chinese yuan was little changed at 7.2696 per dollar.
BOJ's balancing act
The Bank of Japan (BOJ) will also meet this week, where it is widely expected to keep interest rates steady and consider whether to offer clearer guidance on how it plans to reduce its huge balance sheet.
The dollar held the yen pinned at 157.235, although the currency pair remained off the one-week high of 157.40 touched the previous day.
Japan's wholesale inflation jumped in May at the fastest annual pace in nine months, data showed on Wednesday, a sign the weak yen was adding upward pressure on prices.
The yen's decline to a 34-year low of 160.245 per dollar at the end of April triggered several rounds of official Japanese intervention totalling 9.79 trillion yen (US$62.31 billion).
Overnight implied dollar/yen volatility touched a one-month high of 13.37 percent on Wednesday ahead of the key events.
In cryptocurrencies, bitcoin last rose 0.15 percent to US$67,381.00.