Currency markets are steady in Asia after a volatile start to the week, with the dollar finding support as investors assess shifting expectations for U.S. interest rates. October inflation data is now in focus because a stronger-than-expected reading could reinforce bets on another Federal Reserve rate increase and lift the greenback further.
Highlights
- The dollar remains firm in Tuesday's Asia session following a rebound in risk sentiment and lower oil prices, as traders await U.S. inflation data.
- Markets now price an 85% chance of a Federal Reserve rate hike next month after October U.S. jobs growth exceeded forecasts.
- Economists expect October headline inflation at 3.9% and core inflation at 2.8%, with any upside surprise likely to boost dollar bullishness.
Inflation outlook steadies dollar trading
As reported by Reuters, the dollar is holding firm in Tuesday's Asia session after a pullback driven by lower oil prices and a broader move back into riskier assets.The Australian dollar rises nearly 1% through Monday to trade at $0.6921 early on Tuesday, while the New Zealand dollar climbs to $0.5624 and remains steady in morning Asia trade. The euro gains 0.7% overnight to $1.1220, reversing a Friday drop that followed strong U.S. jobs data and stronger interest rate expectations.
The dollar index has risen this year as expectations for U.S. rate cuts give way to bets on further tightening after the U.S.-Israeli war on Iran pushes up energy prices and fuels inflation. After October jobs growth comes in at more than twice forecasts, markets price an 85% chance of a Federal Reserve rate increase next month.
Economists polled by Reuters expect headline inflation to accelerate to 3.9% year on year in October and core inflation to reach 2.8%. Analysts say any reading above those levels is likely to strengthen expectations for additional rate hikes and support the dollar.
Earlier, we reported that UBS Global Wealth Management expected a December Fed hike and another in March 2027 after September inflation surprised higher.
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