By Gina Lee
Investing.com – The dollar inched up on Thursday morning in Asia, reversing some losses stemming from trimmed rapid inflation acceleration bets over U.S. consumer price data and a drop in Treasury yields.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.01% to 91.787 by 9:10 PM ET (2:10 AM GMT).
The USD/JPY pair inched up 0.10% to 108.48.
The AUD/USD pair inched up 0.10% to 0.7742 and the NZD/USD pair edged up 0.11% to 0.7203. Although the riskier Antipodean currencies steadied against the dollar, sentiment for them remains strong thanks to rising commodities prices and continuing hopes for an acceleration in global trade.
The USD/CNY pair inched down 0.10% to 6.4986 and the GBP/USD pair inched up 0.02% to 1.3933.
The U.S. data, released on Wednesday, showed that core consumer prices rose 0.1% month-on-month in February, down from the 0.2% growth in forecasts prepared by Investing.com but unchanged from the 0.1% growth recorded in January.
Prices rose 1.3% year-on-year, slowing down slightly from the forecast 1.4% growth, and the 1.4% growth recorded in January.
However, dollar sentiment remained positive thanks to signs of the U.S. economic recovery from COVID-19. The U.S. House of Representatives gave final approval to a massive $1.9 trillion stimulus package, with some investors hoping that any further declines in the dollar are likely temporary.
President Joe Biden is expected to sign the bill into law before current enhanced federal unemployment benefits expire on Sunday.
“The reflation trade looks set to continue … the dollar is the dominant theme in the currency market, and any downturn is just a temporary pause in its uptrend,” IG Securities senior foreign exchange strategist Junichi Ishikawa told Reuters.
Investors are also keeping an eye on U.S. Treasury yields, which are climbing steadily over expectations that the Federal Reserve’s loose monetary policy and massive fiscal stimulus could drive inflation up.
Also on investors’ radars is the auction of 30-year Treasuries later in the day, an important indicator of demand for new debt. Wednesday's auction of ten-year Treasuries was met with sufficient demand and allayed concerns about investors’ ability to absorb the increase in debt needed to finance the COVID-19 response.
If future auctions also draw reasonably strong demand this would be another positive factor for the dollar, said IG Securities’ Ishikawa.
Across the Atlantic, the European Central Bank (ECB) will hand down its policy decision later in the day. Investors will look out for the central bank’s take on preventing bond yields from rising further, with ECB avoiding large-scale market intervention so far and policymakers divided ahead of their meeting.
The strengthening euro is also causing investors to be cautious ahead of the ECB’s meeting and policy decision. The dollar was quoted at $1.1928 against the euro, after its 0.2% fall during the previous session.