The dollar edged higher against the yen on Wednesday as investors awaited U.S. inflation data for May and the Fed’s interest rate decision next week, while the Canadian dollar jumped after the Bank of Canada hiked rates.

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The US central bank is expected to hold rates steady next Wednesday as it evaluates the impact of recent rate increases, though Fed fund futures traders are pricing for an additional rate hike in July.

Consumer inflation data on Tuesday is expected to show that prices rose by 0.30% in May. (USCPI=ECI)

"We expect a fair degree of consolidation ahead of the Fed decision next week," said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto. "That CPI number’s going to be critical for the Fed decision as well. To me it makes sense that we don’t see large bets placed either way at this point."

The dollar gained 0.31% to 140.10 yen , while the euro rose 0.11% against the U.S. currency to $1.0703. The dollar index was little changed on the day at 104.07.

Data on Wednesday showed that the U.S. trade deficit widened by the most in eight years in April as imports of goods rebounded while exports of energy products declined.

Traders have also priced out most expectations that the Fed will cut rates this year as inflation remains above target.

"There is persistence and resilience in inflation in the U.S., but also in much of the G10, as well, meaning that central banks are likely to be cautious," said Rabobank chief strategist Jane Foley.

The Canadian dollar strengthened after the Bank of Canada hiked its overnight benchmark rate to 4.75%, the highest level in 22 years.

The US dollar was last down 0.23% against the loonie at C$1.3371.

Although the rate hikes by foreign central banks could put pressure on the greenback, the prospect of an additional Fed rate increase in July is likely to limit losses.

The Fed next week may indicate that it is not done raising rates, and "that might short circuit the idea of the dollar getting hit because the Fed is going to be out of step with Canada, Australia and probably the ECB during this month’s meeting, because they’ll still have the idea that there’s more to come," said Lou Brien, market strategist at DRW Trading in Chicago.

The Australian dollar turned negative a day after the Reserve Bank of Australia raised rates by a quarter-point to an 11-year high of 4.1%.

Australia's central bank chief on Wednesday stepped up a warning of more rate hikes ahead to temper rising price pressures.

The Australian currency was last down 0.25% at $0.6657, after earlier reaching $0.6718, the highest since May 11.

The offshore Chinese yuan reached its weakest level against the U.S. dollar since Nov. 30 after data earlier on Wednesday showed that China's exports shrank much faster than expected in May and imports fell as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.

The yuan was last at 7.1465 against the greenback.