Yen lags while dollar waits on US CPI
The yen fell 0.9% on the dollar overnight and 1.2% on the euro after data showed workers' real wages shrank for a 20th straight month in November — confounding officials wishes to see wage gains before tightening policy.
The yen was under gentle pressure at 145.55 per dollar in morning trade and hit a six-week low of 159.99 per euro. The euro bought $1.0974 and other majors were steady on the dollar with all eyes on the U.S.
data due at 1330 GMT.
The dollar has steadied in early 2024 after sliding through the latter months of 2023 as the Federal Reserve indicated it was finished with rate hikes and traders priced in steep cuts.
While that pricing has moderated slightly, futures still show that market sees 140 basis points (bps) of cuts this year and a 2/3 chance they begin as soon as March — a view that could be challenged if inflation surprises on the high side.
New York Fed President John Williams said on Wednesday that it's still too soon to call for rate cuts as the central bank still has distance to go getting inflation back to 2%.
Core inflation is seen falling to 3.8% year on year for December, its slowest since early 2021.
«Despite this year's adjustment in market pricing, in our view investors are still too optimistically positioned for Fed rate cuts,» said Rabobank senior FX strategist Jane Foley in a note to clients.
«We expect further correction in this outlook and consequently expect the dollar to see some support on a 1-to-3-month view,» she said, with the euro to face pressure from a weakening German economy.
«We see scope for euro/dollar to dip to $1.05 on a 3-month view, before the impact of Fed rate cuts boosts risk appetite and weakens the dollar in the second half of the year.»
The dollar
