Dollar Up, Above 100-Mark Ahead of U.S. Inflation Data

By Gina Lee – The dollar was up on Tuesday morning in Asia, climbing back above the 100 mark. The U.S. currency was supported by high yields ahead of inflation data due later in the day, which also heightened expectations of tighter monetary policy.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.13% to 100.055 by 11:47 PM ET (3:47 AM GMT). The index tested a near two-year high of 100.19 that it hit during the previous week.

The USD/JPY pair inched up 0.06% to 125.43.

The AUD/USD pair inched up 0.09% to 0.7426 and the NZD/USD pair inched up 0.01% to 0.6825.

The USD/CNY pair was steady at 6.3702. The dollar gained overnight on the offshore Chinese yuan, hitting a two-week high of 6.390 in early Asian trading.

The GBP/USD pair inched down 0.04% to 1.3024.

The dollar also continued its gains against the yen and was very near the overnight intraday high of 125.77 and a June 2015 high of 125.86. Although Japanese Finance Minister Shunichi Suzuki on Tuesday declined to comment on specific prices in foreign exchange markets, he said excess volatility and disorderly movements could have an adverse effect on the economy and financial stability.

The dollar’s strength “was most apparent against JPY and CNH, currencies of economies with a dovish central bank,” CBA analysts said in a morning note.

CBA also expects very high U.S. inflation will reinforce expectations of aggressive Fed tightening. As a 50-basis point rate hike was not yet fully priced in for each of the next two Fed meetings, it expects further gains for the dollar.

“We expect the dollar to stay bid and lift to the pandemic high of 103 pts in the coming months,” said the note.

Investors now await the U.S. consumer price index, due later in the day.

U.S. longer-term yields also continued an upward trend, with the yield on benchmark 10-year notes hitting 2.836%, its highest since December 2018. The yield on the 30-year Treasury bond also rose to 2.86%, its highest since May 2019.

Meanwhile, the euro gave up its gains from Monday, after incumbent French President Emmanuel Macron beat rival Marine Le Pen in the first round of presidential voting on Apr. 10. The single currency last traded at $1.087 and was not far from its Friday close.

“The bottom line, then, is that we are where we were before the vote,” Rabobank analysts said in their own note.

“Macron looks set to return to office following the runoff Apr. 24 vote but the scale of his victory is likely to be far smaller than when he was seen as an upstart five years ago and likely slim enough that the political earthquake that would be a Le Pen victory cannot be entirely discounted.”

Easing oil prices also limited gains for the commodity-linked Australian and New Zealand dollars. The Reserve Bank of New Zealand will also hand down its policy decision on Wednesday.

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