US Dollar on Hold as Inflation Data Looms, Bitcoin Hits $60,000

29 Feb 2024 , 11:37 AM

In the run-up to U.S. inflation statistics that might shake up the outlook for interest rates, the U.S. dollar remained strong and the yen was set to lose ground each month, while bitcoin jumped past $60,000.

Overnight, Bitcoin surged above $63,000 as investors flocked to newly launched U.S. bitcoin exchange-traded funds. It has gained more than 45% so far this month, the most since December 2020, and a record high of more than $69,000 is not far off.

In February, the yen fell 2.7% versus the euro and 2.5% versus the dollar, marking the biggest monthly decline against the single currency since June of last year, when it reached three-month lows.

Early Asia trade saw the yen hit 150.68 against the dollar, bringing it ever closer to October’s lowest point of 151.74 and extremely near to prices that would have prompted government intervention in 2022. 

Speaking to traders on the fringes of the G20 financial leaders gathering in Sao Paulo, Japan’s top currency ambassador Masato Kanda told them that the government is keeping a close eye on currency movements ‘with a strong sense of urgency’ and is prepared to act.

The New Zealand currency saw losses on wagers that the country’s rate rises would end. It plummeted 1.2% against the dollar as the central bank held rates and shocked investors by lowering its rate projection. It lastly clustered at $0.6100. 

‘The overall take from the (Reserve Bank of New Zealand) is that the risk of further rate hikes has lessened, which reinforces our view that (cash rate) has peaked in this current cycle,’ Sue Ann Lee, an economist at UOB, said.

The core personal consumption expenditures (PCE) price index, the preferred inflation gauge of the Federal Reserve, is expected to rise by 0.4% on Thursday.

Investors were hoping for a mere 0.2% gain not too long ago, but recent readings on producer and consumer prices indicate that there is a 0.5% chance of a result.

According to currency analyst Kristina Clifton of Commonwealth Bank of Australia, ‘a stronger than expected PCE deflator can cause markets to reduce pricing for May rate cut even further, supporting U.S. dollar.’

The likelihood of a Fed easing in May is priced by the markets at 20%, and they have moved the probable date of a cut to June. As of the beginning of the month, five 25 basis point cuts were implied by futures; this year, a little over three.

The decline in iron ore prices, Australia’s main export, and the belief that interest rates won’t climb any more have contributed to the 1.1% decline in the Australian dollar for February.

This month, the euro has been relatively stable against the dollar as anticipations for rate cuts in Europe have decreased in lockstep with those in the United States. At $1.0837, it was last stable. In February, sterling fell 0.2% to $1.2660.

At 103.92, the U.S. dollar index is up 0.3%.

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