Dollar firm as inflation test looms

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SYDNEY — The dollar started the week with

support as traders bet U.S. inflation data and appearances from

several Federal Reserve officials would bolster the case for

higher interest rates.

After dipping on Friday, the greenback stood around its

200-day moving average against the euro at $1.1357 in

early Asia trade on Monday. It firmed slightly on the yen to

115.65, fairly close to last week’s five-year high of

116.35 per dollar.

Trade in the Asia session was thinned by a holiday in Japan.

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Federal Reserve chair Jerome Powell and governor Lael

Brainard testify before Senate committees this week regarding

their nominations as chair and deputy chair at the Fed.

U.S. inflation figures are due on Wednesday, with headline

CPI seen climbing to a red-hot 7% year-on-year.

“The dollar index is likely to recoup some of its Friday

losses this week on Powell’s likely hawkish commentary and

rising U.S. inflation,” said Scotiabank FX strategist Qi Gao.

Eventually, though, he added that the greenback would

probably run out of steam, and the index head towards 94 once

money markets fully price in a Fed hike in March.

The dollar index last sat at 95.800.

U.S.-Russia talks over rising tension in Ukraine also have

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traders on edge as the two sides seem far apart and failure

risks an armed confrontation on Europe’s doorstep.

The Australian dollar was marginally weaker at

$0.7179 early in the Asia session and has been held below

resistance around $0.7190.

The kiwi was steady at $0.6750.

The dollar had met with some selling late last week after a

weaker-than-expected headline U.S. job-creation figure squeezed

traders out of long dollar positions.

But analysts said better-than-expected unemployment numbers

still made a good case for hikes sooner rather than later.

Fed funds futures have priced an almost 90% chance

of a rate hike in March and a more than 90% chance of another

one by June and U.S. yields have been surging higher.

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Sterling was also marginally weaker on the dollar

but has been rallying with bets that the Bank of England (BOE)

is likely to be hiking in tandem with the Fed.

It was last at $1.3590, near a two-month high, and close to

last week’s two-year peak on the euro. Strategists at

MUFG reckon traders are too hawkish on their rates expectations

in Britain but still think sterling will hold its own.

“We still expect two rate hikes by the BOE which should keep

EUR/GBP under modest downward pressure, which will result in

GBP/USD advancing to around the 1.4000 level,” they said in an

outlook note published over the weekend.

Cryptocurrencies have faced pressure from broad selling in

risk assets at the start of this year, but were steady in Asia

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after bitcoin managed to hold support at $40,000 through weekend

trade.

Bitcoin last bought $41,784 and ether

$3,145.

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Currency bid prices at 0020 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1354 $1.1362 -0.07% -0.13% +1.1360 +1.1347

Dollar/Yen 115.6450 115.5500 +0.00% +0.46% +115.6550 +0.0000

Euro/Yen

Dollar/Swiss 0.9190 0.9185 +0.00% +0.69% +0.9192 +0.0000

Sterling/Dollar 1.3591 1.3598 -0.04% +0.50% +1.3593 +1.3585

Dollar/Canadian 1.2649 1.2648 +0.00% +0.04% +1.2656 +1.2640

Aussie/Dollar 0.7179 0.7183 -0.05% -1.24% +0.7184 +0.7173

NZ 0.6773 0.6771 +0.05% -1.03% +0.6780 +0.6769

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook. Editing by Lincoln Feast.)