The\u00a0dollar\/yen exchange rate extended early loses after the release of June consumer price index data, last trading at about 161.74.<\/p>\n
The dollar index dropped about 0.59% to 100.66 after the better-than-expected inflation report sent Treasury yields lower.<\/p>\n
Still, the dollar\u00a0remained in sight of 13-month highs on Tuesday in the wake of the U.S. inflation data, which will come under extra scrutiny as\u00a0Middle East\u00a0\u200btensions boost oil prices, while\u00a0Federal Reserve\u00a0\u200bChair\u00a0Kevin Warsh\u00a0is poised to deliver his first \u200bsemiannual testimony to\u00a0Congress.\u00a0<\/p>\n
U.S. and Iranian forces traded attacks in the Gulf, where maritime traffic through the\u00a0Strait of Hormuz\u00a0has come to near-standstill, pushing oil towards\u00a0$90\u00a0a barrel. <\/p>\n
As a result, investors are now pricing in a higher chance of global interest rates rising this year. With \u2060uncertainty \u200cover how long the latest tit-for-tat exchanges might last and how they \u2060might affect the flow of oil to world markets, investors are focused on the outlook for price pressures. <\/p>\n
“Core inflation, combined with rising oil prices, is supportive for the\u00a0dollar\u00a0and then there’s Warsh. I think he will be pressed a bit harder than he was post-Fed, which will be interesting, because he wants to \u200ckeep his cards close to his chest,” City Index market strategist\u00a0Fiona Cincotta\u00a0said of the new Fed Chair’s aversion to giving much of a steer on monetary policy. <\/p>\n
Warsh said recently that anyone expecting the Fed to \u200bgo soft on inflation would be “disappointed,” although he stopped short of offering any guidance for what to expect in terms of monetary policy in coming months. <\/p>\n
Markets show traders are attaching a 20% chance of a rate hike from the Fed in July, which had pushed\u00a0U.S.\u00a0Treasury\u00a0yields above 4.6%, their highest since May, and given the\u00a0dollar\u00a0a layer \u2060of support. The 10-year yield fell to about 4.53% in the wake of the June CPI report. <\/p>\n
Meanwhile, Federal Reserve Governor\u00a0Christopher Waller\u00a0said rates may need to rise “in the near term” if data shows inflation remaining well above the central \u200cbank’s 2% target. <\/p>\n
Economists polled by Reuters expected\u00a0U.S. headline inflation to have risen 3.8% \u200cin June, while the core rate, which excludes food and energy inflation, was expected to have risen 2.8%. In the event, the headline rate was 3.5% and the core rate fell to 2.6%.<\/p>\n
The euro was up 0.6% at\u00a0$1.1453, while sterling rose 0.6% to\u00a0$1.3422. <\/p>\n
Overnight currency volatility jumped, reflecting nervousness among traders. Overnight implied volatility for the euro , which reflects demand to hedge against large, immediate \u2060swings in the currency, briefly topped 10% on Tuesday, something that has rarely happened since April.<\/p>\n
Yen vulnerable<\/p>\n
The Japanese yen \u2060stayed barely above 40-year lows, which kept traders \u2060on alert for signs of possible official buying from\u00a0Tokyo.<\/p>\n
The Japanese currency briefly strengthened following comments from Finance Minister\u00a0Satsuki Katayama\u00a0that\u00a0Tokyo\u00a0may consider adjusting state pension fund asset allocations if the environment surrounding asset \u200bmanagement changed sharply.<\/p>\n
Health Minister\u00a0Kenichiro Ueno\u00a0told a separate press conference \u200con Tuesday that the ministry would examine reviewing the\u00a0Government Pension Investment Fund’s\u00a0(GPIF) asset allocation if needed, but downplayed the prospect of any near-term changes.<\/p>\n
“In order for yen-buying pressure from a review of GPIF’s asset allocation to be sustained, the decision would likely need to be made quickly, and the increases in the allocation to domestic assets would probably need to be at least 5 percentage points” in stocks and bonds each, said \u200bMasafumi Yamamoto, chief currency strategist at\u00a0Mizuho Securities.<\/p>\n
“If the \u200cincreases are only modest, or if the decision-making process takes time, any additional yen buying is likely to be limited,” he said in a note.<\/p>\n","protected":false},"excerpt":{"rendered":"The\u00a0dollar\/yen exchange rate extended early loses after the release of June consumer price index data, last trading at…\n","protected":false},"author":2,"featured_media":540972,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[11468,7263,951,118611,941,114,357,7255,54,7261,184,9506,39211,10913,94853,20046,30937,85,87,46,94852,93011,3336,40042,1032,7262,30938],"class_list":["post-540971","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-australian-dollar","tag-australian-dollar-us-dollar-fx-spot-rate","tag-bitcoin","tag-bitcoin-usd-coinbase","tag-breaking-news-markets","tag-business","tag-business-news","tag-currency-markets","tag-donald-trump","tag-dxy-us-dollar-currency-index","tag-economy","tag-ethereum-usd-coin-metrics","tag-eur-usd","tag-federal-reserve-system","tag-forex-markets","tag-gbp-usd","tag-ice-brent-crude-oct25","tag-il","tag-iran","tag-israel","tag-money-markets","tag-new-zealand-dollar-us-dollar-fx-spot-rate","tag-tehran","tag-u-s-dollar","tag-united-states","tag-usd-jpy","tag-wti-crude-sep25"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/540971","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=540971"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/540971\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/540972"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=540971"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=540971"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=540971"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}