Friday, September 24

Dollar drifts after soft inflation, Chinese data weighs on Asian currencies


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TOKYO — The dollar held recent ranges

against peers on Wednesday after softer-than-expected US

inflation figures tempered immediate expectations about Federal

Reserve tapering while disappointing Chinese data weighed on the

yuan and Aussie.

The dollar index stood at 92.632, little changed from

Tuesday, when it dropped following the inflation data only to

recover on haven demand as stocks slid on Wall Street.

The index has meandered between 92.3 and 92.9 over the past

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week as several Fed officials have suggested the US central

bank could reduce its buying of debt securities by the end of

the year, even after a much-weaker-than-expected payrolls report

at the start of the month.

While elevated inflation has kept pressure on policymakers,

data overnight showed the US consumer price index, excluding

the volatile food and energy components, edged up just 0.1% last

month.

The Federal Open Market Committee (FOMC) holds its monetary

policy meeting next week, with investors keen to find out

whether a tapering announcement will be made.

Tapering tends to benefit the dollar as it suggests the Fed

is one step closer toward tighter monetary policy. It also means

the central bank will be buying fewer debt assets, effectively

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reducing the number of dollars in circulation.

“The softer print eases concerns over an imminent

acceleration in prices and should nullify any lingering pressure

on the Fed to taper in September,” Rodrigo Catril, a senior

currency strategist at National Australia Bank, wrote in a

client note.

“But a taper this year still looks like a good bet, with

November or December now looking more likely.”

Even so, NAB predicts that the focus of global growth is

shifting away from the United States, pushing the currency down

to $1.23 versus the euro by year-end.

One euro bought $1.1808 on Wednesday, mostly flat from the

previous session.

European Central Bank Chief Economist Philip Lane speaks at

the IMFS webinar later in the global day.

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The dollar slipped slightly to 109.595 yen,

keeping close to the center of the trading range of the past two

months.

Commonwealth Bank of Australia is more bullish on the

dollar’s prospects, predicting that accelerating employment

costs in the United States will keep consumer prices elevated.

“Above-target inflation will prove more persistent than the

FOMC expects,” Carol Kong, a strategist at CBA, wrote in a

report.

“The implication is the FOMC will likely need to raise the

Funds rate by more than what markets are currently expecting,

which could support the USD down the track.”

Meanwhile, the yuan and the Australian dollar

were knocked lower after Chinese data showed factory

and retail sales growth cooled more sharply than expected last

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month.

Adding to the broader China worries in financial markets was

a media report that embattled property developer China

Evergrande Group won’t be able to make interest

payments on its debt next week.

The yuan extended its decline for the day to as far as

6.4433 yuan per dollar before trading about 0.1% weaker at

6.4410, threatening to snap a five-day string of gains.

The Aussie sank as low as $0.73015 for the first time in

more than two weeks following China’s data, but recovered to be

little changed at $0.7320.

================================================== ======

Currency bid prices at 0558 GMT

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1805 $1.1806 +0.00% -3.38% +1.1812 +1.1801

Dollar/Yen 109.5700 109.6750 -0.09% +6.09% +109.7350 +109.5550

Euro/Yen

Dollar/Swiss 0.9201 0.9201 +0.01% +4.01% +0.9204 +0.9195

Sterling/Dollar 1.3813 1.3808 +0.04% +1.11% +1.3814 +1.3794

Dollar/Canadian 1.2691 1.2693 +0.00% -0.32% +1.2708 +1.2682

Aussie/Dollar 0.7322 0.7323 -0.01% -4.82% +0.7329 +0.7302

NZ 0.7093 0.7098 -0.04% -1.20% +0.7099 +0.7074

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Kevin Buckland; Editing by Sam Holmes)

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