After a week of anxious anticipation, the markets got the high inflation rate in the US, which they feared, then ignored it and moved on, leaving the US dollar under pressure, and most of the big companies were stuck in the range.
In the early Asian session, the dollar suffered a slight loss as traders believed a one-off 0.6% rise in consumer prices last month was enough to support the Federal Reserve’s assertion that inflation is likely to be temporary.
The dollar bought 109.44 yen and suffered a small weekly loss. It was also on track for moderate weekly losses in the Australian dollar and the British pound, the latter trading at $ 0.7752 per Australian dollar and $ 1.41825 per pound.
The dovish commitment of the European Central Bank to stick to a high rate of bond buying kept the euro at $ 1.2189. read more
“We are seeing a market that believes in the Fed,” said Chris Weston, head of research at the Pepperstone broker in Melbourne, as investors lose concern that a strong recovery in the United States will trigger an early rate hike.
“We’re going to be phased out,” he said. “But it will be done at a snail’s pace.”
Data released yesterday showed that US consumer prices rose 5% year-on-year, the sharpest rise in more than a decade, while core inflation rose 0.7% in a month. read more
But the significant contribution in the form of short-term increases in the prices of air tickets and used cars helped convince traders that there will be no rise in interest rates anytime soon.
“This is mostly in line with the Fed’s scenario that we will have a surge, but it will be temporary,” said Westpac currency analyst Imre Speiser.
“This report is consistent with that, he doesn’t mind it. I think the market needed something to oppose it in order to push the US dollar higher. “
The US dollar index declined slightly after the publication of inflation data and was last at 89,974, which is very insignificant for the week.
The benchmark 10-year US Treasury actually surged to a three-month high following the CPI as short sellers stopped betting on yields.
The yield on the 10-year bond last stood at 1.4434% after falling to a three-month low of 1.4320% on Friday. A week earlier, it was 1.6350%.
The focus is now on next week’s Fed meeting, although traders are now saying there may not be a significant shift in rhetoric that downplays the need to cut stimulus.
The plan to cut bond purchases is expected to be announced in August or September, according to a Reuters poll of economists, but it is not expected to start earlier than next year. read more
The South Korean won gained 0.2% to 1,110.08 per dollar after the central bank governor hinted at a policy normalization in a preliminary copy of a speech to be delivered later Friday.
The Indonesian rupee rose about 0.4% to 14,187 per dollar as declining US Treasury yields boosted the attractiveness of Indonesian bonds.
Cryptocurrencies appear to end the week on a firmer footing as bitcoin appears to be well supported above $ 35,000 despite more talk of scrutiny by the global regulator. read more
The digital token last traded at $ 37,163.52 and is set to rise 3.5% over the week.
Currency purchase prices at 551 GMT
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Tokyo Foreign Exchange Market Information from the Bank of Japan
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