Greenback weakens after data shows US inflation moderating

THE US dollar weakened on Tuesday (Nov 14) after data for US consumer prices showed signs that underlying inflation slowed in October, increasing the odds that the Federal Reserve is done hiking interest rates.

US consumer prices were unchanged last month amid lower petrol prices, the Labor Department’s Bureau of Labor Statistics (BLS) said, following a 0.4 per cent rise in September.

In the 12 months through October, the consumer price index (CPI) climbed 3.2 per cent after rising 3.7 per cent in September, BLS said.

“You can say goodbye to the rate hiking era,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

Matthew Miskin, co-chief investment strategist at John Hancock Investment Management in Boston, said the Fed will likely be in a holding pattern, with inflation moderating and a weakening labour market.

“Another rate hike from here looks less likely given this softer inflation data,” Miskin said.

The US dollar index, a measure of the US currency against six peers, was down 0.97 per cent at 104.600810. Among major currencies, the euro rose 1.13 per cent to US$1.0818 and the Japanese yen strengthened 0.59 per cent to 150.79 per US dollar.

Fed chair Jerome Powell and other policymakers in recent days have tried to push back against market expectations that the US central bank was done with its aggressive rate-hike cycle.

The yen earlier was under pressure after it briefly jumped against the US dollar on Monday – having touched a one-year low – in a move attributed to a flurry of trading in options rather than any intervention from Japanese authorities.

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DTCC data from LSEG’s Eikon platform shows yen options worth a notional US$3.5 billion with strike prices between 151.90 and 152 are due to expire between Wednesday and Friday.

Another US$2.2 billion notional worth of options, with strikes between 151.90 and 152, will expire between Nov 20 and the end of the month.

Japanese authorities in September and October last year intervened in the currency market to boost the yen for the first time since 1998.

“Our base case is that we could have intervention if we break the 152 level for US dollar/yen,” said Yusuke Miyairi, an FX strategist at Nomura. REUTERS