FOREX-Dollar consolidates ahead of inflation data; yen holds off 152 mark

The yen was holding its ground not far from the 152 mark after Japan's top monetary officials on Wednesday suggested they were ready to intervene to prevent further declines. Speaking during late U.S. trading hours on Wednesday, Fed Governor Christopher Waller said recent disappointing inflation data affirms the case for the U.S. central bank holding off on cutting its short-term interest rate target.

The U.S. dollar consolidated against major currency peers on Thursday as traders braced for key economic data after a Federal Reserve official said he wasn't in a hurry to cut rates amid sticky inflation. The yen was holding its ground not far from the 152 mark after Japan's top monetary officials on Wednesday suggested they were ready to intervene to prevent further declines.

Speaking during late U.S. trading hours on Wednesday, Fed Governor Christopher Waller said recent disappointing inflation data affirms the case for the U.S. central bank holding off on cutting its short-term interest rate target. Market expectations for the first rate cut to occur at the Fed's June meeting have eased somewhat. Current pricing has it at a 60% chance, compared to 67% around this time last week, according to the CME FedWatch tool.

Waller's speech is a "clue that the Fed is more wary of stickier inflation, perhaps even a re-acceleration in price growth," said Kyle Rodda, senior financial market analyst at Capital.com. While the central bank has signalled a willingness to look through some bumps along the way, Rodda perceives the case for rate cuts has on balance weakened.

"A strong inflation read tomorrow could throw into question whether market pricing for three cuts in 2024 is justified," he added. Traders now await U.S. core inflation figures due on Friday, as well as an appearance by Fed Chair Jerome Powell.

The dollar index, a measure of the greenback against major peer currencies, ticked up following Waller's comments, although it last sat marginally lower at 104.34. The dollar has gained around 3% so far in 2024. The yen traded narrowly around 151.34 per dollar, after hitting 151.975 on Wednesday, its lowest since mid-1990.

Japanese authorities held a meeting on Wednesday on the currency's weakness and ramped up their verbal warnings, putting the market on the lookout for any signs that words are being backed up with action. While there may be some trading to defend a move toward 152 yen per dollar for now, Friday's U.S. inflation data posed a significant risk, said Takeshi Ishida, a currency strategist at Resona Holdings.

"Once dollar/yen touches 152, I think there will probably be a sharp move upward, and that's when intervention could take place." Japan intervened in the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid towards a 32-year low of 152 to the dollar.

A summary of opinions at the Bank of Japan's March meeting released on Thursday gave the currency little support, showing many policymakers saw the need to go slow in phasing out ultra-loose monetary policy. Meanwhile, China's central bank set the yuan fixing at the widest gap against Reuters' estimate in nearly five months, as authorities step up efforts to prevent sharp declines in the currency. The yuan slumped to a four-month low last Friday.

The onshore yuan was mostly flat at 7.2249, while offshore it was up 0.08% at $7.2495 per dollar. Elsewhere, the Kiwi dollar briefly dropped to its lowest since mid-November at $0.5981. It was last down 0.22% at $0.5991.

The Aussie fell 0.1% to $0.6527. Domestic retail sales data showed on Thursday an increase of just 0.3% in February. The euro was largely unchanged at $1.082225. Sterling fell 0.08% to $1.26305.

In cryptocurrencies, bitcoin last rose 1.09% to $69,612.11.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)