© Reuters. FILE PHOTO: The US dollar bill seen in this illustration was taken on July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Alun John
HONG KONG (Reuters) – The euro and Japanese yen posted fairly steady gains on Thursday morning after overnight US inflation data cooled more than feared and sent the dollar plunging.
US consumer prices were flat in July from June, when monthly prices rose 1.3%. The July results were lower than expected due to a sharp drop in gasoline prices, prompting the market to reset expectations that inflation was peaking.
If the price gains peak, investors expect the US Federal Reserve will not have to sustain the dizzying pace of interest rate hikes that have supported the dollar.
The euro was at $1.0297 on Thursday morning, after gaining 0.84% a day earlier, its biggest daily percentage gain since mid-June.
The yen was at $132.83/USD, after the greenback fell 1.6% overnight against the Japanese currency, which has been particularly sensitive to US yield moves.
US shares and short-term treasuries also rose on the news, which pushed the Nasdaq up more than 20% from its June low and the yield on two-year Treasuries fell to 3.2141%, a low. seven basis points above the previous close. [MKTS/GLOB]
US Treasuries were not traded in Asia initially due to the holiday in Japan.
Analysts at Standard Chartered said the dollar’s decline appeared to be driven by an improvement in investors’ attitudes towards riskier assets – excluding the move against the yen. , which they consider a yield game.
“The unexpected drop in (inflation) has largely alleviated fears that the market has had a 75 basis point Fed rate hike or even moves between meeting”.
“We suspect that many investors unwilling to place positions before a key number may have gone both ways, so some moves after CPI may reflect buying risky positions. risk is correlated with risk of delay.”
The market is currently pricing in a 57.5% chance of a 50 basis point rate hike at the Fed’s next meeting, according to the CME’s Fedwatch tool, although an additional 75 points is still possible, according to CME’s Fedwatch tool. basic.
Fed policymakers have also warned in public statements after data that they will continue to tighten monetary policy until price pressure is completely broken.
The Australian dollar, another commonly used proxy for risk sentiment, was at $0.7077 after rising 1.7% overnight and the pound was at $1.2207.
has also been trading in line with risk assets, testing its recent highs of $24,000.
Currency bid price at 0109 GMT
RIC Description Last US Close Pct Change Pct YTD High Bid Low Bid Low Bid
Euro / Dollar $1.0295 $1.0299 -0.04% -9.44% +1.0303 +1.0294
Dollar / Yen 132.8700 132.8900 -0.11% + 15.42% +132,9450 + 132.7500
Euro / Yen 136.79 136.88 -0.07% + 4.96% +136.9200 +136.6000
Dollar / Swiss 0.9428 0.9430 -0.02% + 3.36% +0.9429 +0.9424
British Pound / Dollar 1.2205 1.2217 -0.08% -9.74% +1.2220 +1.2206
Dollar / Canada 1.2781 1.2778 + 0.03% + 1.09% +1.2782 +1.2774
Aussie / Dollar 0.7076 0.7082 -0.09% -2.67% +0.7088 +0.7075
NZ 0.6401 0.6404 -0.05% -6.48% +0.6412 +0.6401
Dollar / Dollar
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