Dollar Down, Moves Remain Small Ahead of U.S. Inflation Data

© Reuters.

By Gina Lee

AiVIF.com – The dollar was down on Tuesday morning in Asia, as investors await U.S. inflation data that could provide a clue to the U.S. Federal Reserve’s timetable for asset tapering.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.06% to 92.597 by 10:21 PM ET (2:21 AM GMT), after retreating from a two-week high of 92.887 hit earlier on Monday.

The USD/JPY pair inched up 0.10% to 110.08.

The AUD/USD pair inched down 0.05% to 0.7362 and the NZD/USD pair inched down 0.10% to 0.7114.

The USD/CNY pair inched down 0.02% to 6.4495 and the GBP/USD pair inched up 0.08% to 1.3847.

The U.S. will release consumer price index data later in the day, which will be closely watched by investors.

"With the core CPI still seen above 4%, inflation is at a very abnormal level. Powell has been saying inflation will be transient since March but the Fed will probably have to adjust its wording in the next policy statement," Daiwa Securities senior strategist Yukio Ishizuki told Reuters.

Investors also await the Fed’s policy decision, due to be handed down next week, where the central bank is expected to agree to begin asset tapering in November.

"Asset tapering in 2021 is a done deal. The next question will be whether the Fed will raise interest rates in 2021. Given persistent inflation, the Fed may not be able to afford to be relaxed about it for too long," said Ishizuki.

Although global shares remain near record highs, increasing investors’ risk appetites, some investors warned of risks up ahead.

"Global risk appetite is edging toward a more tenuous and twitchier phase. A discordant G2 is increasingly the problem," Deutsche Bank (DE:DBKGn) macro strategist Alan Ruskin told Reuters.

"The U.S.-China trade dispute has not found any resolution. On the contrary, market forces are dominating quantity targets, and widening bilateral balances will again prove a source of tension," he added.

Another development in China on investors’ radars is China Evergrande Group's (HK:3333) debt situation. The cash-strapped property developer is struggling to calm solvency concerns while the country’s tech firms deal with the latest round of regulatory tightening.

In cryptocurrencies, bitcoin fell to as low as $43,400, the lowest level in almost a week and last traded at $44,973. Ether also fell to $3,283.