Dollar stabilizes with anticipation of US inflation data

The dollar was broadly stable ahead of US inflation data later on Wednesday, although it rose against the yen as investors digested comments from the Bank of Japan Governor indicating a possible end to negative interest rate policy.

The US currency rose about 0.2 percent to 147.39 against the yen.

Alvin Tan, head of Asia FX strategy at RBC Capital Markets, said investors have more time to consider Bank of Japan Governor Kazuo Ueda’s comments more carefully.

He added, “The statements we had in mind were completely conditional. Ueda did not promise anything.”

Ruling party lawmaker Hiroshige Seko also signaled Tuesday his preference for ultra-loose monetary policy after Ueda’s comments sent the yen and bond yields higher.

The yen was under great pressure against the dollar, as the Bank of Japan is still pursuing a policy that is contrary to the rest of the global central banks, especially since the Federal Reserve began its monetary tightening cycle in March 2022.

More broadly, the dollar remained stable although moves were weak as traders awaited closely watched US inflation data due later on Wednesday.

The British pound fell 0.05 percent to $1.2489, and the Australian dollar fell 0.03 percent to $0.6408.

The dollar index, which measures the performance of the US currency against a basket of competing currencies, settled at 104.61 after falling to its lowest level in a week on Monday and recording its largest daily decline in two months.

As for the euro, it saw little change, settling at $1.0753. The highest level in a week was recorded at $1.0777 in the last session, with rising expectations that the European Central Bank will continue to raise interest rates before announcing the monetary policy decision.

A source told Reuters that the European Central Bank expects inflation in the 20-country euro zone to remain above three percent next year, strengthening expectations for a tenth consecutive increase in interest rates on Thursday.