Read for 4 minutes (Reuters) – SINGAPORE (Reuters) – On Tuesday, currency markets were jittery, and the dollar was a few ticks weaker, ahead of U.S. inflation data that traders believe could provide insight into the timing of tapering and rate hikes. FILE PHOTO: A Korea Exchange Bank employee counts one hundred US dollar bills during a photo opportunity on April 28, 2010 at the bank’s headquarters in Seoul. Jo Yong/Reuters Hak The likelihood of raises, which was sparked by the Federal Reserve’s surprise shift in tone last month, has bolstered the dollar in recent weeks as investors re-examined their assumption of extended low U.S. rates. The dollar fell a touch against the euro during the Asian session, reaching $1.1868, but it is still up around 2.2 percent against the single currency in a month. Aside from the upcoming U.S. inflation statistics, comments from European Central Bank President Christine Lagarde on Monday, who signaled a dovish shift in forward guidance, kept additional changes in the euro at bay. The consumer price index in the United States is expected to have risen 0.5 percent from May and 4.9 percent from a year ago, according to economists polled by Reuters. A miss on either side, according to dealers, might impact the greenback and the bond market by changing interest rate expectations. “My back-of-the-envelope playbook is that we’d need a headline year-over-year number north of 5.5 percent to truly set this market ablaze,” Chris Weston, head of research at broker Pepperstone, said. “We should see USD/JPY and USD/CHF under pressure if the headline print is below 4.5 percent,” he said. Kit Juckes, a strategist at Societe Generale, sees downside risks to the dollar and predicts a stronger reaction – strengthening the yen – if inflation falls short of expectations and investors believe easy monetary policy can remain a little longer. At 1230 GMT, the data is due. The Japanese yen last traded at 110.37 per dollar in Asia. The Swiss franc remained stable at 0.9146 per dollar, near a one-month high. The Australian dollar was up 0.1 percent to $0.7491, while the pound was up 0.1 percent to $1.3895. Beyond inflation, upcoming visits by Federal Reserve officials will put the dollar to the test, with markets hypersensitive to any talk of early reduction. On Wednesday and Thursday, Chair Jerome Powell appears before Congress, while officials Neel Kashkari, Raphael Bostic, and Eric Rosengren testify on Tuesday. [FED/DIARY] Traders are also looking to New Zealand on Wednesday, when the central bank meets for the first time since a solid business survey spurred swaps markets to price in rate hikes as early as November. The Reserve Bank of New Zealand is unlikely to alter policy or issue predictions, but a change in advice is probable. In a note, Westpac analyst Imre Speizer said, “The narrative should endorse current market pricing,” a move that he suggested might provide the kiwi a little boost. “Our hawkish scenario (which we believe has a 25% chance of happening) includes an implied signal that tightening might begin at any point in the coming meetings.” The New Zealand dollar was recently trading at $0.6993, 0.1 percent higher than its 20-day moving average. [NZD/] In other news, China’s yuan climbed to a near one-week high after unexpectedly robust trade statistics allayed fears of a slowdown in the world’s strongest economic growth. At the time of writing, it was trading at $6.4655 per dollar. The US dollar index remained unchanged at 92.222. Bitcoin fell 1% to $32,789, and ether fell below its 200-day moving average to $1,990, putting pressure on the cryptocurrency. Shri Navaratnam and Jacqueline Wong edited the piece./n
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