Wednesday June 18, 2014 - 00:38:13 GMT
Share This Story
Reuters - www.reuters.com
FOREX-Dollar underpinned by inflation data, eyes on Fed
* Dollar firmer against many of its major counterparts
* Upside inflation surprise helps lift demand for USD
* All eyes on Fed meeting outcome and Yellen's press conference
By Ian Chua
SYDNEY, June 18 (Reuters) - The U.S. dollar held onto modest gains early on Wednesday, having risen broadly after U.S. consumer prices recorded their largest increase in more than a year in May.
The dollar index last stood at 80.607, having climbed 0.2 percent on Tuesday. Against the yen, the greenback reached a one-week high of 102.25, while the euro retreated from a one-week peak to $1.3547.
U.S. consumer price index rose 0.4 percent, double what economists had expected, raising the risk that a separate inflation gauge watched by the Fed also pushed higher in May.
The data came as U.S. Federal Reserve policy makers prepared to conclude a two-day meeting.
"Almost all measures of U.S. price pressure are rising, and the CPI shows the clear upswing," said Emma Lawson, senior currency strategist at National Australia Bank in Sydney.
"With the U.S. labour market improving, and the Fed's other mandate being stable prices, these type of inflation pick-ups will make it difficult for the Fed to ignore."
The Fed is widely expected to chop another $10 billion from its monthly bond purchases, but is considered unlikely to make other concrete policy moves. The focus will be on Fed Chair Janet Yellen's press conference for any clues to longer-term plans for rates.
A recent Reuters poll found a majority of Wall Street's top bond firms don't see the Fed raising rates before the second half of next year.
Any indication that rates might be lifted sooner could spark a rally in the U.S. dollar.
"Our economics team expects the Fed will, in fact, deliver a more hawkish message," analysts at BNP Paribas wrote in a note to clients.
"The statement is likely to upgrade views on inflation and the labour market and the projections of future Fed funds rates are likely to show a creep higher relative to those presented in March."
In contrast, minutes of Australia's central bank June 3 meeting were more dovish than expected.
Released on Tuesday, the minutes showed policy makers predicted subpar economic growth for the whole year ahead and reiterated the central bank's preference to keep interest rates low for some time to come.
That knocked 0.7 percent off the Australian dollar, which dipped to $0.9337, about a full cent off a two-month peak hit just a week ago.
Traders see initial support in the 0.9320/30 zone, an area that provided a base in early May and then turned resistance after the Aussie broke decisively lower in mid-May. The level also represents the 50 percent retracement of its most recent rally from $0.9229 to $0.9348.
There is little in the way of major economic data out of Asia on Wednesday, leaving the focus firmly on the outcome of the Fed meeting. (Editing by Shri Navaratnam)
© Thomson Reuters 2014. All rights reserved.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."