The dollar falls following the CPI report, while the yen rises ahead of the BOJ.
In early European trading on Friday, the U.S. dollar went down a little bit, continuing its slide from the previous session. This was because a drop in U.S. inflation made it possible for the Federal Reserve to slow the rate of interest rate hikes.
At 3:05 p.m. ET (8:05 p.m. GMT), the US Dollar Index, which compares the dollar to a basket of six other currencies, fell 0.1% to 101.965. Earlier in the session, it had fallen to its lowest level since June.
This week, the index will fall by 1.6%, which will be its worst performance since early November.
Related: China’s reopening and hopes for slower US rate hikes caused the dollar to fall.
Since the Federal Reserve slowed down the rate of interest hikes at the end of last year, the dollar has been losing ground. On Thursday, data showed that U.S. CPI inflation slowed in December, which made the dollar even weaker.
This is likely to mean that the Federal Reserve will ease up on its tightening of the money supply even more. In December, the U.S. central bank raised interest rates by 50 basis points after raising them four times in a row by 75 basis points each.
In a speech on Thursday, the president of the Philadelphia Fed, Patrick Harker, said that rate hikes of 25 basis points will be appropriate in the future.
Aside from that, USD/JPY fell 0.6% to 128.51, a level not seen since the end of May last year. The yen is getting a boost from rumours that the Bank of Japan will have to make another hawkish turn next week because inflation is rising so fast in the country.
In December, the BOJ surprised the market by widening the range around its target yield on 10-year bonds. This had the effect of tightening the money supply, and a similar move is expected next week.
GBP/USD went up 0.1% to 1.2210, which was helped by news that the British economy grew slightly in November, which was a bit of a surprise.
Gross domestic product (GDP) grew by 0.1% in October, which was better than the 0.3% drop that was expected. However, growth from the previous three months to November was down by 0.3%.
EUR/USD was flat at 1.0846, which is close to a nine-month high. France’s final inflation numbers show that the CPI fell from 7.1% in November to 6.7% in December, which is the same as what the preliminary inflation numbers for the month showed.
Related: As the Fed minutes take centre stage, Asian stocks rise and the dollar fluctuates.
USD/CNY fell 0.4% to 6.7147, and the yuan was trading near its highest level in six months. This was because data showed that China’s trade balance had gotten better, which is a sign that its economy is getting better after the government eased most anti-COVID measures.