Dollar consolidates as US inflation data nears announcement

The dollar found stability on Monday as market participants awaited the release of a crucial US inflation data report later in the week. This report is anticipated to offer further insights into the expected monetary policy stance at the Federal Reserve, following a cautious start to the year with diminished expectations of interest rate cuts.

In Asia, trading activity was subdued due to a general holiday on the Japanese Stock Exchange.

Against the yen, the dollar edged up by 0.05 percent to 144.67, extending its gains from the previous week when it recorded a remarkable 2.6 percent surge against the Japanese currency, marking its most robust weekly performance since June 2022.

The New Zealand dollar saw a modest 0.1 percent increase, reaching $0.6248, rebounding slightly from the 1.2 percent decline it faced last week. The dollar index settled at 102.38.

The dollar’s upward trajectory received support from the rebound in yields on US Treasury bonds, as traders adjusted their expectations for the pace and magnitude of US interest rate cuts in the coming year.

However, the outlook may undergo a shift based on the reading of US inflation data scheduled for announcement on Thursday. This follows last Friday’s data, which revealed that US employers added more workers than anticipated in December, with strong wage growth indicating a resilient and robust labor market.

Regarding other currencies, the British pound inched up by 0.02 percent to $1.2721, while the euro saw a modest 0.08 percent increase, reaching $1.0948 after facing a 0.9 percent decline last week.

The Australian dollar exhibited a 0.1 percent rise, reaching $0.6721, recovering some of the losses incurred last week when it declined by 1.5 percent.