The dollar managed to stabilize above a four-month low, with investors closely eyeing the U.S. inflation data set to be released later in the day. This data could provide insights into the Federal Reserve’s potential scope for interest rate cuts in the upcoming year.
In early Asia trading, the greenback had touched a five-month low against the New Zealand dollar and a three-week low against the euro. However, it recovered during the session.
The New Zealand dollar was down 0.27% at $0.6277 after briefly touching $0.6298, while the euro hit $1.10125 before slipping 0.12% to $1.0996.
Market expectations for the U.S. core personal consumption expenditures (PCE) suggest a rise of 3.3% on an annual basis, a slight decline from October’s 3.5%.
Chris Weston, head of research at Pepperstone, highlighted the growing belief that U.S. inflation may lean toward lower levels, giving the Federal Reserve more flexibility to ease policy if needed. He noted that with core PCE at 3.5% and decreasing, the Fed could more effectively implement rate cuts.
The dollar index, a measure against a basket of currencies, gained 0.08% to 101.86, moving away from the four-month low of 101.72 from the previous session. However, the index remained on track for a weekly loss of about 0.73%, extending the decline from the previous week.
Sterling held steady at $1.26875 and was headed for a small weekly gain, affected by disappointing British inflation data released earlier in the week.
Regarding the Japanese yen, it remained stable at 142.25 per dollar despite data showing Japan’s core consumer prices increasing by 2.5% in November. This slower pace of increase reduced pressure on the Bank of Japan (BOJ) to alter its current massive stimulus measures. The yen appeared set to end the week without significant changes after the BOJ maintained its ultra-loose policy stance earlier in the week.
