Greenback gains ground against yen, eyes 150 ahead of US inflation data

13 Feb 2024 , 10:50 AM

While bitcoin continued to trade near $50,000 for the second day in a row, the dollar flirted with the psychological barrier of 150 yen on Tuesday and remained relatively stable ahead of an important reading on U.S. inflation that was scheduled later in the day.

With markets in China and Hong Kong still closed for the Lunar New Year holidays, trading was relatively quiet early in Asia as traders remained cautious ahead of Tuesday’s release of consumer prices data in the largest economy in the world.

The US dollar recently purchased 149.39 yen, gradually rising towards the carefully watched 150 mark, which analysts predicted would probably lead to more pressure on Japanese officials to defend the currency.

Against the dollar, the yen has already lost over 5% of its value this year. This is because investors are becoming less optimistic about the scope and speed of the Federal Reserve’s quantitative easing programme. The indications that the Bank of Japan will not raise rates swiftly, even if it does exit negative interest rates this year as markets are speculating, are also giving the yen bears more confidence.

In other news, the sterling dropped 0.07% to $1.2620 while the euro dipped 0.03% to $1.0768.

Similarly, the Australian dollar fell 0.08% to $0.6526.

The US inflation data for January, which was scheduled for release later in the day, was the centre of attention. It is expected to shed more light on the potential timing and magnitude of the Fed’s rate hike this year.

Anticipations that U.S. rates will probably remain higher for a longer period of time have increased in response to a slew of strong U.S. economic statistics, most notably a massive jobs report released earlier this month.

From roughly 160 basis points at the end of last year, markets are now pricing in just about 110 basis points of rate decreases from the Fed this year, starting in May.

In its January Survey of Consumer Expectations, released on Monday, the Federal Reserve Bank of New York stated that inflation in one year and five years was expected to remain constant at 2.5% and 3%, respectively, ahead of Tuesday’s report.

Three years from now, the anticipated increase in inflation fell from 2.6% in December to 2.4%, the lowest level since March 2020.

In relation to a currency basket, the dollar increased somewhat by 0.02% to 104.16. At $0.6121, the New Zealand dollar decreased by 0.11%.

In terms of cryptocurrencies, bitcoin increased 0.64% to $50,155 on Monday after breaking above $50,000 for the first time in over two years.

The largest cryptocurrency in the world has increased by about 18% so far this year thanks to the regulatory approval granted last month to exchange traded funds (ETFs) with U.S. listings that track its price.

The most recent surge in bitcoin, according to analysts, coincides with the cryptocurrency’s impending halving event, which will slash the payout for successfully mining a block in half.

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