Currency markets marked time on Wednesday morning, with the dollar slightly softer and no currency moving enough to claim a driver of its own. The dollar index was at 102.13, down 0.05 percent on the day and down 0.11 percent on the week, just off the 17 month highs tested earlier in the week. The euro rose 0.42 percent to 1.1207, sterling rose 0.4 percent to 1.3262, and the Australian dollar was the largest mover among majors, up 0.74 percent to 0.7008.
The yen firmed modestly, with the dollar down 0.14 percent at 158.3 yen, and the Canadian dollar strengthened, with the US dollar down 0.5 percent at 1.4209 Canadian. The Swiss franc was firmer at 0.8324 per dollar, down 0.2 percent, and the offshore yuan was flat at 6.6921. In emerging markets, Indonesia’s rupiah weakened as investors positioned for the US release, according to Antara’s morning reporting from Jakarta.
The pattern is positioning, not news. Treasury yields eased across the curve in Asian and European trade, by 1 to 3.5 basis points depending on maturity and vintage, and currencies followed yields rather than leading them. With consensus at 3.6 percent for headline US inflation and 2.5 percent for core, the dollar’s next move is a data trade: a hot core print would be expected to lift both the dollar and front end yields, while an in line or soft print would extend the mild pullback from the highs.
The level still matters for everyone else. A dollar index above 102 with a 5.22 percent 10-year Treasury is the financial conditions backdrop against which central banks from Manila to Brasilia are setting policy this month, which is why a quiet morning in FX is itself information about how much tightening is already in the price.