Dollar gains ground in early trade

20 Jul 2023 , 11:51 AM

The dollar regained its footing after a significant dip last week that analysts claimed was overdone, while sterling was trying to rebound from a severe decline on Thursday due to UK inflation data that fell short of market expectations.

Markets in Asia were also paying attention to China’s decision on its loan prime rate (LPR), which is anticipated to maintain lending benchmarks after the central bank decided to do nothing about a crucial policy rate earlier this week.

After plunging more than 0.7% on Wednesday in response to news showing that Britain’s high rate of inflation fell more than anticipated in June to its weakest in almost a year at 7.9%, the British pound was last down 0.02% at $1.2936.

That reduced market expectations of further aggressive rate hikes from the Bank of England (BoE), and it is now unlikely that UK rates will rise above 6%.

Interest rates were formerly predicted by traders to increase by as much as 6.5%.

The euro gained 0.11% elsewhere to $1.1213 as traders anticipated more information on the rate outlook at the European Central Bank’s (ECB) policy meeting the following week.

The Governing Council member Yannis Stournaras is the most recent ECB policymaker to suggest that future rate increases beyond July’s projected 25 bp increase are still uncertain. The ECB has recently adopted a more dovish tone.

Before releasing the nation’s employment figures later on Thursday, the Australian dollar last traded 0.16% higher at $0.6782 while the Japanese yen increased 0.1% to 139.56 per dollar.

The kiwi increased by 0.06% to $0.6267 but fell from the $0.6315 high set in the previous session as New Zealand’s consumer inflation came in slightly higher than expected in the second quarter.

The offshore yuan increased by almost 0.2% to 7.2184 prior to the LPR ruling in China.

Investors are still looking for additional support measures from Chinese authorities to stabilize the country’s sputtering post-COVID recovery, as statistics released on Monday revealed that the economy expanded slowly in the second quarter due to weaker domestic and international demand.

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