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SINGAPORE (Reuters) – The dollar was pinned near its two-week low on Thursday, as lower-than-expected U.S. inflation and another Federal Reserve pledge to keep interest rates low raised expectations for meager returns on reserve currency.
The Aussie was just below a two-week high hit overnight, while the euro held steady at $ 1.2116, near its highest since February 1. The British pound, also boosted by lower expectations of negative interest rates in Britain, was just ahead of Wednesday’s nearly three. – annual peak of $ 1.3865.
Morning movements were light, and Asian trade was brightened by the Lunar New Year holidays in Japan and China. Against a basket of currencies, the dollar sat at 90.428 after hitting a two-week low at 90.249 following the US inflation figures.
Core inflation in the United States was zero last month, according to Wednesday’s data, against market expectations of 0.2%.
In a speech, Fed Chairman Jerome Powell focused on still high unemployment and reiterated that the central bank’s new policy framework could accommodate annual inflation above 2% for a while before rising again rates.
“In other words, an easy policy is going to stay there for a very, very long time, and that should be negative for the US dollar,” said Westpac currency analyst Imre Speizer.
“I think it will be something that will stay in the background, just to remind that the US dollar cannot go up as long as it has this easy policy against everyone.”
The dollar had cut some of its losses against other majors somewhat after the selloff in US tech stocks dampened the optimistic mood in financial markets. The safe haven Japanese yen hit a two-week high at 104.41 per dollar overnight and traded a softer fraction for the last time at 104.62 per dollar.
Bitcoin, sometimes seen as a hedge against inflation, fell about 8% from Tuesday’s record and traded at $ 44,277 on Thursday.
Inflation is in the limelight as economists expect pent-up demand and a weak base effect from last year’s shocks to cause headline numbers to jump by spring, which some investors believe could test the Fed’s resolution.
In New Zealand, for example, where the virus is well contained, soaring accommodation prices are pushing inflation beyond expectations and investors have slashed what had been another rate cut.
“RBNZ arguably faces an entirely different communication challenge (to the Fed), with demand spur in New Zealand in a much better position than anyone dared hope,” wrote analysts at ANZ Bank in a note to customers on Thursday.
“The RBNZ will welcome this, but will continue to stress the need for careful patience.”
The New Zealand dollar was broadly stable at $ 0.7205 on Thursday.
Later Thursday, the European Commission’s economic forecast is expected, as are US labor market figures, with investors referring to the data to assess the relative progress of the recovery.
Reporting by Tom Westbrook; Editing by Sam Holmes
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