By Rae V
SINGAPORE (Reuters) – The dollar edged closer to the psychological threshold of 150 yen on Tuesday and remained broadly steady ahead of key readings on U.S. inflation later in the day, while bitcoin hovered around $50,000 for a second consecutive day.
Trading in Asia was largely slow early on, with markets in China and Hong Kong still closed for Lunar New Year holidays and traders remaining cautious ahead of the release of consumer prices data in the world’s largest economy on Tuesday.
The greenback last bought 149.39 yen, moving toward the closely watched 150 level, which analysts say could lead to more pressure from Japanese authorities in an effort to support the currency. Could.
The yen, which has already fallen more than 5% against the dollar year-to-date, remains under pressure as investors have lowered their expectations of the scale and pace of the Federal Reserve’s easing cycle. Yen bears are also being boosted by signals that the Bank of Japan will resist raising rates aggressively, even if it moves away from negative interest rates this year, as markets are betting.
“It’s a bit of a yield story. US yields are near their highest level until 2024, so that’s certainly helped the dollar/yen,” said Tony Sycamore, market analyst at IG.
“It is also being supported by carry. With such low volatility and… For 2024, markets are very happy to add risk to their portfolios, and the carry trade is certainly part of that, given the dollar/yen supports because the yield differential.”
Elsewhere, the euro fell 0.03% to $1.0768, while sterling fell 0.07% to $1.2620.
The Australian dollar also fell 0.08% to $0.6526.
All eyes were on the January inflation report for the United States, due later in the day, which will likely provide further clarity on how quickly and by how much the Fed might cut rates this year.
A batch of resilient US economic data, particularly a bumpy jobs report earlier this month, have boosted expectations that US rates are likely to remain high for longer.
Markets are now pricing in about 110 basis points of Fed rate cuts starting in May this year, down from about 160 bps late last year.
Ahead of Tuesday’s data, the Federal Reserve Bank of New York said in its January survey of consumer expectations on Monday that inflation a year and five years from now was unchanged at readings of 3% and 2.5%, respectively.
The expected rise in inflation three years from now declined to 2.4% from 2.6% in December, the lowest since March 2020.
“Obviously, the U.S. dollar has really benefited from the resilient data we’ve seen recently, and we’ve seen the U.S. economic outperformance story really drive currency markets,” said senior financial markets analyst Kyle Rhoda. Has been.” capital.com.
“You’re not really seeing the same level of strength anywhere in Europe and Asia… and that’s certainly showing traction for the greenback.”
Against a basket of currencies, the dollar rose 0.02% to 104.16. The New Zealand dollar fell 0.11% to $0.6121.
Among cryptocurrencies, Bitcoin gained 0.64% to $50,155, rising above the $50,000 level for the first time in more than two years on Monday.
The world’s largest cryptocurrency has gained about 18% this year, helped by last month’s regulatory approval for a US-listed exchange traded fund (ETF) designed to track its price.
Analysts said the latest boost to Bitcoin comes ahead of its halving event, which will halve the reward for successfully mining a Bitcoin block.
“This is a really interesting move. The expectation of a rate cut certainly helps, but it doesn’t explain how Bitcoin has really been on fire over the last four, five sessions,” IG’s Sycamore said.
“In that regard, I think it’s more focused on the halving… and some ETF inflows.”
(Reporting by Rai V)