LONDON, Dec 21 (Reuters) – The dollar dipped on Thursday while sterling crosses were nursing losses in holiday-thinned trade ahead of the last major data release of the year in Friday’s U.S. inflation figures.<\/p>\n
Sterling suffered its sharpest drop on the dollar in two months on Wednesday after British inflation dived below forecasts to an annual 3.9% in October, a two-year low.<\/p>\n
The currency fell 0.7% to $1.2638 as traders priced in Bank of England rate cuts as soon as May. On Thursday it hit a one-week low of $1.2613, before recovering slightly as the dollar softened. It was last at $1.2669.<\/p>\n
Against the euro the pound hit its weakest in more than three weeks at 86.78 pence, while it was also lower against the Aussie and yen.<\/p>\n
Analysts are forecasting a similar easing for Friday’s U.S. core personal consumption expenditure (PCE) data, with the annual inflation rate seen slowing to its lowest since 2021 at 3.3%.<\/p>\n
The dollar index, which measures the currency against six other including the pound, was down 0.4% at 102.01.<\/p>\n
“Broadly speaking the market is happy to run with this Goldilocks-type soft landing scenario, which tends to lead to the dollar softening,” said Dominic Bunning, head of European FX research at HSBC.<\/p>\n
“Even if we don’t necessarily buy into that in the medium term, in the short term it’s hard to fight it.”<\/p>\n
Some analysts said month-end rebalancing in thin trade was also driving the dollar lower.<\/p>\n
“US equity market outperformance through December rather suggests that passive hedge rebalancing flows will run against the USD through month end,” said Shaun Osborne, chief FX strategist at Scotiabank.<\/p>\n
“While markets look relatively calm and trade flows appear to be thinning out, there may still be motivation to push spot rates around after all.”<\/p>\n
Heavy selling in the final hour of equities trade on Wall Street on Wednesday had also sent a ripple of risk-aversion through markets, even as stock futures steadied.<\/p>\n
The mood helped the safe-haven yen along with Japan lifting its growth projection for the fiscal year to 1.6%.<\/p>\n
The yen rose about 0.6% and last traded at 142.725 per dollar.<\/p>\n
It has still lost more than 8% on the dollar this year as the Bank of Japan has steadfastly kept short-term rates negative, against 300 basis points of U.S. interest rate hikes.<\/p>\n
Analysts at Goldman Sachs said that markets should take note of the BoJ retaining its easing bias at the last meeting.<\/p>\n
“Market pricing for action early next year is still too aggressive, especially when considering how widespread the disinflation narrative has become,” Goldman Sachs analysts said in a note.<\/p>\n
“This is just one of the reasons why we think there is still limited scope for substantial yen appreciation.”<\/p>\n
The euro was up 0.4% at $1.0986.<\/p>\n
The Australian and New Zealand dollars traded just below Wednesday’s five-month highs. The Aussie was last at $0.6759, having touched its highest since July at $0.6779 a day earlier. The kiwi traded at $0.6262.<\/p>\n
China’s yuan was steady as offshore yuan funding costs fell and China’s blue-chip stock index hovered near five-year lows. It was last at 7.14 to the dollar.<\/p>\n
Bitcoin leapt back above $44,000 and was up at $44.171, just below last week’s 20-month high of $44,729.<\/p>\n
(Reporting by Samuel Indyk and Tom Westbrook; Editing by Michael Perry and Susan Fenton and Chizu Nomiyama)<\/p>\n","protected":false},"excerpt":{"rendered":"
LONDON, Dec 21 (Reuters) – The dollar dipped on Thursday while sterling crosses were nursing losses in holiday-thinned trade ahead of the last major data release of the year in Friday’s U.S. inflation figures. Sterling suffered its sharpest drop on the dollar in two months…<\/p>\n","protected":false},"featured_media":31236,"menu_order":0,"template":"","acf":[],"yoast_head":"\n