The dollar faced uncertainty on Tuesday as traders awaited key data that could offer insights into the U.S. Federal Reserve's policy direction. Meanwhile, the yen strengthened following data confirming that Japan's core consumer inflation exceeded expectations. Some anticipate the Bank of Japan (BOJ) might end negative interest rates by April.
Francesco Pesole, a forex strategist at ING, noted the modest rise in the yen, considering its significant short positioning and recent sell-off. He suggested the BOJ is unlikely to signal an earlier move than April.
The yen rose by 0.35% to 150.18, reaching its highest level since November 16. Bitcoin reached a two-year high in Asian trade, hitting $57,036. The U.S. dollar index was down 0.05% at 103.71.
Market expectations regarding the timing and scale of Fed rate cuts have recently shifted, reflecting a robust U.S. economy and persistent inflation pressures. The release of the PCE deflator on Thursday is a highlight this week and could influence bets on Fed easing.
The euro edged up 0.1% against the dollar at 1.0859, supported by reduced bets on future European Central Bank rate cuts. Analysts predict a rise to 1.10 against the greenback in the short term.
The Australian dollar gained 0.2% to $0.6552 ahead of monthly consumer price data, while the kiwi eased 0.1% to $0.616, with focus on the Reserve Bank of New Zealand's potential policy changes on Wednesday.
Market participants are watching for signals from the RBNZ, with some pricing in a chance of a rate hike to combat inflation. The broader economic outlook and central bank officials' stances on monetary policy remain key factors influencing market sentiment.
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