On Tuesday, the dollar found itself under pressure as profit-taking activities took hold, exacerbated by the yen’s marginal strength as Japanese officials persisted in their efforts to verbally defend the currency’s value.
Amidst this backdrop, the New Zealand dollar rebounded from a four-month low, trading at $0.5999, while sterling also saw some firming to $1.2636, moving away from its recent one-month trough.
With a relatively quiet economic data calendar for the week, investors are turning their attention to the release of the Federal Reserve’s preferred inflation gauge on Friday. This data point is expected to provide insights into the trajectory of U.S. interest rates.
Analysts anticipate the U.S. core personal consumption expenditures (PCE) price index to show a 0.3% increase in February, maintaining the annual rate at 2.8%. Any reading surpassing 3% annually could spark concerns about a bumpier-than-expected path for interest rates, despite Fed Chair’s efforts to temper aggressive rate hike expectations.
Last week’s central bank meetings led to a shift in the global rate outlook, pushing the dollar to a one-month high against major currencies. While the Fed reiterated its projection of three rate hikes this year, dovish signals from other central banks suggested an easing cycle was underway.
Thierry Wizman, a global FX and rates strategist at Macquarie, noted the challenge for the dollar to weaken amidst stronger U.S. growth compared to the rest of the world, compounded by other central banks adopting a more dovish stance than the Fed.
In Japan, the greenback faced resistance near the 152 level against the yen, declining 0.04% to 151.37. Concerns over potential intervention from Japanese authorities loomed large, with Finance Minister Shunichi Suzuki not ruling out measures to address the yen’s weakening.
The offshore yuan, meanwhile, extended its gains from the previous session, rising nearly 0.1% to 7.2487 per dollar. Suspected dollar selling by China’s state-owned banks and strong official guidance set by the central bank supported the currency in the onshore market.