The dollar edged up on Tuesday, lifted by a pick-up in the U.S. Treasury yields. With that, and as riskier currencies dipped, markets waited for the United States inflation data. Moreover, the market’s focus will be on how yields react to a 30-year Treasury auction.
In April, the dollar has declined so far. That was after surging in the first three months this year on expectations that a combination of monetary stimulus and government spending would cause a spike in inflation.
At 1230 GMT, the U.S. CPI data for March is due and is likely to show an uptick in inflation.
Ned Rumpeltin, head of European currency strategy at TD Securities said the inflation figure alone was unlikely to move the dollar. But any reaction in U.S. yields could create a knock-on effect on currency markets. This will be particularly in the dollar-yen pair.
The greenback was up 0.1% at 92.221 at 1103 GMT, , getting off from its recent three-week lows.
Dollar-yen dipped 0.2% at 109.150.
The 10-year U.S. Treasury yield was at 1.6677%, still below the 1.7760% level hit on March 30, which was the highest in over a year.
Deutsche Bank strategist Jim Reid in a note said, there’s a widespread expectation that inflation is set to rise in the coming months. But also a consensus for the most part that this will be a transitory phenomenon, the note said.
Rumpeltin has also said that the inflation number could be driven by factors other than demand. He said if there are supply-chain problems and the costs are rising because of it, that’s not really inflation in his book.
The Biggest Risk
The biggest risk among investors in BofA’s fund manager survey released on Tuesday was seen to be the worries that the U.S. Federal Reserve would scale back or taper its quantitative easing programme.
Overnight data showed China’s exports rose in March. That was with import growth rising to four-year highs, indicating an improvement in global demand.
After the data, Asian stock markets were broadly positive. However, the increase did little to support forex markets. In London trading, China’s offshore yuan lost 0.1% against the dollar, changing hands at 6.5536.
The euro fell 0.2%, at $1.18935, and European shares were just below all-time highs.
With the antipodean currencies, the Australian dollar dropped 0.2% versus the U.S. dollar at 0.7609, while the New Zealand dollar was unchanged.