© Reuters. FILE PHOTO: US dollar banknotes are seen in this illustration taken on March 10, 2023. REUTERS/Dado Rovic/Illustration
Written by Karen Britel
NEW YORK (Reuters) – The dollar fell against the euro and the yen on Wednesday, with no major catalysts to move the market as investors await US inflation data for May next Tuesday and the Federal Reserve’s interest rate decision the next day.
The US central bank is expected to hold interest rates steady as it assesses the impact of recent rate hikes, though Fed fund futures traders are eyeing an additional rate hike in July.
Consumer inflation data on Tuesday is expected to show that prices rose 0.30% in May.
“We expect a reasonable degree of consolidation ahead of the Fed’s decision next week,” said Bipan Rai, head of North American FX strategy at CIBC Capital Markets in Toronto. “This CPI number is going to be important to the Fed’s decision as well, and it makes sense to me that we don’t see big bets placed either way at this point.”
The euro was last up 0.30% against the dollar at $1.0726, and the US unit was down 0.22% at 139.33 yen. It decreased by 0.29%, to 103.77.
Traders also weighed in on most expectations that the Fed will cut interest rates this year as inflation remains above target.
“There is persistence and resilience in inflation in the US, but also in many G10 countries, which means that central banks are likely to be cautious,” said Jane Foley, chief strategist at Rabobank.
Data on Wednesday showed that the United States’ trade deficit widened sharply in April as imports of goods rebounded while exports fell, a trend that if continued could cause trade to be a drag on economic growth in the second quarter.
The dollar lost some momentum in the past week as investors dumped long bets that acted as a hedge before the US government raised the debt ceiling.
Investors are also watching whether the US Treasury will see any demand problems as it dramatically ramps up Treasury bond issuance to rebuild its cash balance after the debt limit increase.
That “could be a significant driver of the market depending on who issues additional Treasuries – whether it’s households, banks or money market funds,” Ray said.
The Canadian dollar strengthened after the Bank of Canada raised its benchmark overnight rate to 4.75%, the highest level in 22 years.
The US dollar was last down 0.39% against 1.3350 Canadian dollars.
The Australian dollar also extended higher, a day after the Reserve Bank of Australia raised interest rates a quarter point to an 11-year high of 4.1%.
Australia’s central bank chief on Wednesday ratcheted up his warning of more interest rate hikes ahead to ease mounting price pressures.
The Australian currency was last up 0.42% at $0.6700.
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Coin offer prices at 10:10 am (1410 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
previous change
a class
Dollar Index 103.7700 104.0800 -0.29% 0.271% +104.2900 +103.6400
EUR/USD 1.0726 USD 1.0693 + 0.30% + 0.10% + 1.0740 USD + 1.0669 USD
USD/JPY 139.3300 139.6450 -0.22% +6.28% +139.6550 +139.0250
EUR/JPY 149.44 149.29 +0.10% +6.51% +149.6000 +148.6400
USD/CHF 0.9052 0.9077 -0.28% -2.10% +0.9087 +0.9044
GBP/USD 1.2482 USD 1.2423 + 0.49% + 3.22% + 1.2500 USD + 1.2395 USD
USD/CAD 1.3350 1.3402 -0.39% -1.47% +1.3426 +1.3321
AUD/USD $0.6700 $0.6672 +0.42% -1.71% + $0.6717 + $0.6663
EUR/CHF 0.9708 0.9703 +0.05% -1.89% +0.9717 +0.9691
EUR/GBP 0.8591 0.8604 -0.15% -2.86% +0.8612 +0.8589
0.6081 NZD 0.6079 + 0.05% -4.21% + 0.6097 + 0.6060
dollars / dollars
USD/Norway 11.0000 11.0960 -0.97% +11.96% +11.1330 +10.9880
Euro / Norway 11.7982 11.8554 -0.48% + 12.43% +11.8950 +11.7859
Dollar / Sweden 10.8337 10.9181 -0.35% +4.09% +10.9448 +10.8178
Euro / Sweden 11.6173 11.6586 -0.35% +4.19% +11.6985 +11.6138
