© Reuters. FILE PHOTO: A US dollar note appears in front of a stock chart in this photo illustration on November 7, 2016. Photo: Dado Rovich/Reuters
By Hideyuki Sano and Kevin Buckland
TOKYO (Reuters) – The dollar held near a one-month high against a basket of currencies on Wednesday as investors tried to ascertain whether the Federal Reserve might change the language of stimulus after the recent rise in inflation in the United States.
The price settled at 90.528, after hitting a one-month high of 90,677 on Tuesday despite mixed US economic data.
US retail sales fell more than expected in May but sales in April were sharply revised and well above the pre-pandemic level.
With spending returning to services from goods as vaccines allow Americans to travel and engage in other activities, the data reinforced the perception of a robust recovery in the economy.
Separate data showed wholesale price inflation accelerated to 6.6%, the biggest rise since November 2010.
The Federal Reserve is widely expected to acknowledge the first talks among policymakers about when and how to scale back the massive bond-buying program launched in 2020 when it wraps up its policy meeting later in the day.
However, most investors believe that the Fed will hold off on any hints of starting to scale back stimulus in the near future.
“The Fed said they would be reacting to the data…and said they wanted to see extended inflationary conditions before committing to decreases or increases,” said Bart Wakabayashi, director of the Tokyo branch. at State Street (NYSE: Bank.
Wakabayashi said the dollar should rise if the Fed drops any hint that rate tapering or rate hikes will be introduced soon, but added, “I think they’ll stick to the same mantra, and it may end up not being an event.”
Some market players have also noted that the dollar could rise by default as other major currencies appear to be losing momentum.
“We have to note that the US dollar is now rising even with the US debt yield dropping below 1.5%,” said Makoto Nogi, chief forex analyst at SMBC Nikko Securities.
“The currency market today is indicating strong potential pressure to raise the dollar, if there is some kind of surprise from the Fed.”
The euro settled at $1.2126, little changed on the day, but struggled to recover from last week’s slide after the European Central Bank pledged to keep stimulus steady over the summer.
The yen settled at 110.08 yen to the dollar, close to a two-month low of 110,325 it touched earlier this month, with the Bank of Japan expected to extend some pandemic relief measures this week.
The British pound, a solid performer so far this year, hit a one-month low of $1.4035 on Tuesday despite stronger-than-expected employment data. The last time was at $1.4085.
The number of employees on British companies’ payroll rose by a record in May while wage growth posted its biggest rise since 2007 in April although statisticians warned that this was distorted by comparisons to lower wages last year and increased job losses among high-paid employees. low wages.
While the UK’s job recovery appears to continue as the economy reopens, the rapid spread of the highly contagious delta variant of the novel coronavirus, which has forced Prime Minister Boris Johnson to delay his plans to lift the lockdown, is seen as a risk.
The Australian dollar lacked momentum after the country’s central bank indicated on Tuesday its desire to extend its bond-buying program next month.
The coin was trading at $0.7685, not far from the seven-week low of $0.7646 it touched earlier this month.
In the crypto markets, bitcoin was trading at $4,0305, after hitting a nearly one-month high of $41,341 on Tuesday, buoyed by a new investment promise from major supporter MicroStrategy and an upbeat tweet from Tesla (NASDAQ:) chief Elon Musk.
Ether had less momentum, at $2,561.