LONDON (Reuters) – The dollar fell at a quiet Asian session on Thursday, following softer-than-expected U.S. inflation data for January and a reiteration of the Federal Reserve’s dovish policy stance, but recovered some losses as European markets opened up.
U.S. core inflation last month was at zero, Wednesday’s data showed, against a market expectation of 0.2%.
Federal Reserve Chairman Jerome Powell said while he expected fundamental effects and pent-up demand when the economy opened up entirely to encourage inflation, that was likely to be temporary, citing three decades of higher prices. low and stable.
Powell also confirmed that the central bank ‘s new policy framework could accept annual inflation above 2% for some time before raising rates, confirming market expectations of weak dollar yields.
Money market movements were small overnight due to the New Year’s holidays in Japan and China, but the dollar fell near a two-week low against a basket of currencies.
At 0805 GMT, it was lower on the day at 90.411, after recovering from some overnight losses as European markets opened.
“There is no move in the policy stance (to a hawkish side, less accommodation) to come, US front end levels remain at anchor, the US curve is about to tighten longer and reality rates are going to be very negative, ”said ING FX strategists who wrote in a note to messengers.
“As the global economy begins to recover over the winter in Q2, this suggests more upside in revolving currencies, and the real negative US rates should help the low yields, such as EUR vs the dollar, ”they said.
At 0806 GMT, the euro remained unchanged against the dollar, at $ 1.2121.
The Australian dollar – seen as a beer substitute for risk aversion – rose 0.3% at 0.7743 against the dollar, after coming close to a two-week high overnight.
The British pound remained flat at $ 1.3825, down from a three-year high of $ 1.3865 reached on Wednesday.
Oil prices fell, taking up some of the recent gains after Brent crude strengthened for 9 consecutive sessions. The commodity-linked Norwegian crown fell from a year-over-year high against the euro and the pair changed hands at 10.261 at 0817 GMT.
Instead, U.S. President Joe Biden and his Chinese representative Xi Jinping spoke for the first time since the U.S. election. Biden said free and open Indo-Pacific was a priority and raised concerns about China’s actions in Hong Kong, Xinjiang and Taiwan.
“President Biden seems to be laying the groundwork for his approach in China which may differ slightly from Trump in a few respects, but the main line is that the U.S. sees China as a `strategic competitor ‘,” Commerzbank chief economist Hao Zhou wrote in a note to clients.
With Chinese markets closed, the Yuan had little response to the phone call.
Bitcoin was trading at around $ 44,682 at 0825 GMT. The cryptocurrency, which is sometimes seen as a hedge against inflation, has fallen around 7% from Tuesday’s record high. Ethereum also fell from record highs recently.
Reporting by Elizabeth Howcroft, edited by Larry King