Dollar Weakens on US Inflation Data

16 Jan 2025 , 10:00 AM

The yen reached a one-month high on growing bets of a rate hike in Japan, while the dollar fell Thursday to stand barely off recent heights after cooling U.S. inflation data lowered bond yields.

As U.S. inflation relief increased the likelihood of rate reduction by the Federal Reserve and coincided with speculation of a Bank of Japan boost next week, the yen was the largest major mover on the dollar overnight, jumping by around 1% and extending gains in Asia.

Although the Israeli shekel reached a one-month high, foreign exchange markets did not directly respond to the news of a ceasefire agreement in Gaza.

December’s core U.S. inflation rate was 0.2% month over month, which was below November’s 0.3% and consistent with projections. On an annual basis, the 3.2% reading was lower than the 3.3% forecast. This came after a Bank of England policymaker stated that the time was appropriate to lower interest rates and a similarly weaker-than-expected British inflation data.

Markets are watching Donald Trump’s inauguration day with caution because of a number of executive orders, particularly those pertaining to tariffs, which might cause the currency and asset prices to plummet.

In addition to the start of Trump’s presidency, investors are anticipating a Bank of Japan meeting next week and Chinese growth data that is due on Friday.

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