The American dollar rate has maintained its current level despite uncertainties surrounding inflation. Recent figures showed the Consumer Price Index (CPI) rising by 0.3% in December, surpassing the expected 0.2% increase. While this rise is not necessarily favorable news, experts do not regard it as a harbinger of high inflation in the US dollars market.
Markets continue to anticipate rate cuts beginning this March, followed by additional cuts, but the recent inflation data may temper these expectations. Traders are now betting with over a 73% likelihood that the Federal Reserve will implement the first cut in March, reducing rates by 25 basis points (bps). This anticipated rate cut could influence the value of a dollar in the international markets.
Moreover, the stability of the American dollar rate suggests market confidence. The dollar index remained steady at around 102.25. Although this marks a decrease from Thursday’s figure of 102.76, it significantly exceeds the December lows of 100.61. At that time, traders anticipated aggressive rate cuts, which substantially weakened the dollar. Now, with more balanced expectations, the US dollars have experienced a recovery.
Steady Currencies in a Volatile Market
This minimal impact is evident when comparing several major currencies against the U.S. dollar, as most exhibited little change. For instance, the euro remained around $1.0977, consistent with its level from the previous day. Similarly, the British pound achieved a slight gain of 0.1%, closing just over $1.27, demonstrating the relative strength of a dollar in these pairings.
In the case of the Japanese yen, the currency maintained a stable position at around 145.11 against the dollar. Thankfully, it stayed above its previous month’s low of 146.41. The yen’s resilience is partly due to the lowering of U.S. Treasury yields, which were around 3.98%.
Finally, the Chinese yuan also remained steady, hovering around 7.17 against the dollar. This stability occurs despite indicators of challenges in the Chinese economy. It is likely that officials are taking measures to maintain the yuan’s stability, possibly in anticipation of releasing additional economic stimulus, which again reflects the stable American dollar rate.
