SINGAPORE (Jan 11): The dollar held its ground on Wednesday, in spite of downward pressure from lower bond yields and higher stocks, as traders waited on this week's US consumer price data to see whether it will confirm that inflation is in retreat.
The Australian dollar nudged about 0.3% higher to US$0.6912 after data showed the annual pace of inflation increased to 7.3% in November, leaving room for more rate hikes. The New Zealand dollar also crept up 0.2% to US$0.6380.
The US dollar was steady elsewhere, loitering just above a seven-month low on the euro at US$1.0737 in the lead-up to US inflation data due on Thursday.
The greenback has lost about 11% against the common currency since hitting a 20-year peak in September, as investors have started to anticipate easing inflation and with it a falling dollar as the need for more interest rate hikes wanes.
But for the past month or so the common currency has struggled to make headway, and traders have been cautious in selling dollars while the US Federal Reserve continues to promise hikes and the global economic outlook is bleak.
"It's becoming harder to argue a stronger dollar story, very clearly," ING chief economist Rob Carnell said.
"But it still remains a difficult one to argue a really strong euro story," he said, which is holding back wider losses for the dollar as the euro/dollar pair sets the broad tone.
The dollar was steady at 132.23 Japanese yen and US$1.2161 per British pound. US government bond yields, which have been attracting investors to the dollar, fell overnight and upbeat sentiment in equities lifted stockmarkets.
Federal Reserve chair Jerome Powell did not give any policy clues during a panel discussion in Stockholm overnight, and with other Fed officials saying their next moves will be data-dependent, investors are keenly focused on US CPI data.
"Another downward surprise to the core CPI would cement the deceleration trend," Commonwealth Bank of Australia strategist Joe Capurso said.
"The U.S. dollar would ease further because another soft core CPI would encourage markets to continue to shift pricing for the (Fed's) 2 February meeting from a 50 basis point increase to a 25bp increase."
Futures pricing has been bumpy, but indicates markets' now lean towards a 3/4 chance of a 25 bp hike next month.
China's re-opening has also supported sentiment and lifted Asia's currencies against the dollar.
China's yuan was a whisker short of a five-month high at 6.7814 in offshore trade early on Wednesday.
The Singapore dollar has scaled 19-month highs this week and the Thai baht nine-month tops in anticipation of tourism picking up as China's borders open.