Singapore, Hong Kong (Reuters) – On Wednesday, the major currencies stayed the same because traders were afraid to make big bets before the U.S. inflation data, which will be closely watched by the markets to see how quickly the U.S. Federal Reserve will raise interest rates in the coming months.
At 12:30 GMT, the numbers are due. Economists think that year-over-year headline inflation will be 8.7%, which is a small drop from June’s huge 9.1%. The rate of core inflation is expected to be 0.5% per month.
The dollar was mostly stable. It had stopped falling, which had begun in the middle of July.
It was worth 135 Japanese yen, $1.0215 in euros, and $1.2089 in British pounds.None of these prices changed much during the day, and most of them haven’t changed much since the beginning of the week.
“Everyone is watching the U.S. CPI,” said Carol Kong, a currency strategist at Australia’s Commonwealth Bank (OTC:CMWAY).
This week, currencies have been quiet, and unless something big happens in the news, we don’t think the dollar will move out of its range before the data.
Traders think that the response will depend on the core inflation number.
Alan Ruskin, a strategist at Deutsche Bank (ETR:DBKGn), said, “A core CPI surprise that goes down will get the market more excited at first than one that goes up.” A surprise drop in prices would add to the hope that inflation will go down quickly because commodity prices are going down.
“It will also play into the market’s recent tendency to buy risk when it goes down,” he said. “Overall, it will be bad for the U.S. dollar.”
“An upside core CPI surprise will fit with the pattern of the last three releases,” he said. “In this case, the purest long-dollar trade is against the yen.” He added that the dollar/yen exchange rate could rise to between 135 and 139 per dollar.
Fed officials Charles Evans and Neel Kashkari are scheduled to speak at 15:00 GMT and 18:00 GMT, which could give us a quick idea of how policymakers will react. However, they will have a new set of price data in August before the policy meeting in September.
The Australian and New Zealand dollars were also stable, with the Aussie closing at $0.6967, just above its 50-day moving average. The cost of the kiwi was $0.6295.
On Wednesday, Chinese inflation data showed that annual consumer inflation went up by a small amount, to 2.7%, and that factory-gate price growth slowed down. Analysts at HSBC said that the fact that the CPI number was still low showed “ongoing pressure in the consumption recovery.”
Offshore, the yuan lost a little ground and is now worth 6.762 dollars. [CNY/]
A bitcoin was worth $23,000 on Wednesday, after a string of cryptocurrency fund losses and thefts in the past few months.
