Greenback edges up before US inflation data release

London

THE US dollar edged higher on Tuesday, helped by a pick-up in US Treasury yields, while riskier currencies dipped, as markets waited for inflation data in the United States.

The US dollar has fallen in April so far, after surging in the first three months of 2021 on expectations that a combination of monetary stimulus and government spending would cause inflation to spike.

US consumer price index (CPI) data for March is due at 1230 GMT and is expected to show a rise in inflation.

Markets will also be paying attention to how yields react to a 30-year Treasury auction.

The inflation figure alone was unlikely to move the dollar, said Ned Rumpeltin, head of European currency strategy at TD Securities, but any reaction in US yields could create a knock-on effect on currency markets, particularly in the dollar-yen pair.

At 1103 GMT, the dollar was up 0.1 per cent against a basket of currencies, at 92.221, moving away from recent three-week lows. Dollar-yen was down 0.2 per cent at 109.150.

The 10-year US Treasury yield was at 1.6677 per cent, still well below the 1.7760 per cent level reached on March 30, which was the highest in over a year.

"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," Deutsche Bank strategist Jim Reid wrote in a note.

Worries that the US Federal Reserve would scale back - or "taper" - its quantitative easing programme was seen as the biggest risk among investors in BofA's fund manager survey released on Tuesday.

Overnight data showed China's exports rose in March, with import growth rising to four-year highs, signalling an improvement in global demand.

Asian stock markets were broadly positive after the data, but the boost did little to support currency markets. In London trading, China's offshore yuan was down 0.1 per cent against the dollar, changing hands at 6.5536.

The euro was down 0.2 per cent, at US$1.18935, with European shares just below all-time highs.

The Australian dollar, which is seen as a liquid proxy for risk appetite, was down 0.2 per cent versus the US dollar at 0.7609.

The New Zealand dollar was steady. The Reserve Bank of New Zealand is due to meet on Wednesday and is expected to keep rates constant. REUTERS