Dollar strengthens its position slightly as US inflation data approaches

The dollar stabilized above its lowest level in over four months on Friday, with expectations centered on the release of crucial inflation data in the United States later in the day. This data may offer insights into the potential for the central bank to cut rates in the coming year.

Initially, the dollar touched its lowest level in five months against the New Zealand dollar and in three weeks against the euro during early Asian trading. However, it reversed direction later in the session.

In the latest trading, the New Zealand dollar fell by 0.27 percent to $0.6277 after reaching a session high of $0.6298. The euro initially rose to $1.10125 but later declined by 0.12 percent to $1.0996.

The US Core Personal Consumption Expenditures (PCE) report, the Federal Reserve’s preferred measure of real inflation, is set to be released on Friday. Expectations suggest a year-on-year increase of 3.3 percent, compared to 3.5 percent in October.

The dollar index, measuring the US currency against a basket of major currencies, rose by 0.08 percent to 101.86. While it moved slightly away from the earlier session’s lowest level in four months at 101.72, the dollar index is still on track to record weekly losses of about 0.73 percent, continuing the decline observed last week. This decline followed the US Central Bank’s decision to leave the door open for potential interest rate cuts next year during its last monetary policy meeting of the current year.

The pound sterling settled at $1.26875, showing slight weekly gains under pressure from lower-than-expected inflation data in Britain.

In Asia, the yen recorded at 142.25 against the dollar in the latest trading. The data released on Friday showed that core consumer prices in Japan rose 2.5 percent in November on an annual basis, marking the slowest pace of increase in over a year. This eased some pressure on the Bank of Japan regarding the potential end of its massive stimulus program.