Dollar droops ahead of crucial CPI test; yen under pressure
dollar traded near a one-month low versus the euro on Wednesday amid lower Treasury yields as traders braced for a key U.S. inflation report later in the day that could dictate the path of Federal Reserve policy.
The yen languished near a two-week low, as a still-gaping yield gap between local bonds and U.S. peers continued to encourage selling of the Japanese currency.
The yuan slid to a two-week low versus the dollar after U.S. President Joe Biden unveiled steep tariff increases on an array of Chinese imports, including computer chips, fomenting tensions with Beijing.
The euro edged down 0.04% to $1.0814 in early Asian trading hours, but remained close to the overnight high of $1.09255, a level last seen on April 10.
The U.S. dollar index — which measures the currency against six top rivals, but is heavily weighted towards the euro — was flat at 105.04 after a drop to a 1 1/2-week low of 104.95 on Tuesday.
The benchmark long-term U.S. Treasury yield was little changed at 4.4472% after a 3 1/2-basis point (bp) retreat overnight.
Wednesday's report on core consumer prices is expected to show CPI rose 0.3% month-on-month in April, down from a 0.4% growth the previous month, according to a Reuters poll.
Fed Chair Jerome Powell gave a bullish assessment on Tuesday of where the U.S. economy stands, with an outlook for continued above-trend growth and confidence in falling inflation that, while eroded by recent data, remains largely intact.
Higher-than-expected consumer prices in the first quarter of the year
