SINGAPORE (Reuters) – The U.S. dollar swayed on Friday, flirting with seven-month lows after a pointy dive overnight as data showed U.S. inflation was slowing, boosting hopes of the Federal Reserve taking its foot off an aggressive rate of interest hike policy.
The dollar index, which measures the U.S. currency against six others, rose 0.059% to 102.220 but was languishing around its lowest level since June.
The euro was up 0.03% to $1.0849, having touched fresh nine-month high earlier within the session. Sterling was last trading at $1.221, up 0.08% on the day.
U.S consumer prices surprisingly fell for the primary time in greater than 2-1/2 years in December, with Federal Reserve policymakers expressing their relief and paving the best way for the central bank to slow the pace of monetary tightening.
Traders of futures tied to the Fed’s policy rate bet heavily on a downshift to quarter-percentage-point rises starting on the Jan. 31 to Feb. 1 meeting and a pause just under 5%, with rate of interest cuts priced in for later within the yr.
The U.S. central bank in December raised rates of interest by 50 basis points but said it could must keep them higher for longer to tame inflation.
“Hikes of 25 basis points will probably be appropriate going forward,” Philadelphia Fed president Patrick Harker said in a speech to an area group in Malvern, Pennsylvania.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said the Fed would likely take comfort within the inflation report and the U.S. dollar would proceed to ease.
“Although we’re likely seeing the height within the dollar, there continues to be some room for the dollar to strengthen temporarily,” Kong said, citing the economic slowdown anticipated around the globe.
Meanwhile, the yen strengthened 0.12% to 129.10 per dollar, having touched a fresh seven-month high of 128.65 per dollar earlier within the session.
The yen has been buoyed on rising speculation that the Bank of Japan (BOJ) will review the unwanted side effects of its monetary easing at next week’s policy meeting.
The Australian dollar fell 0.11% to $0.696, while the kiwi fell 0.34% to $0.637.
(Reporting by Ankur Banerjee in Singapore; Editing by Bradley Perrett)
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