Dollar gains, euro recovers on better than expected data

The dollar index held near 16-month highs on Tuesday after Federal Reserve Chair Jerome Powell was picked for a second term, reinforcing market expectations that U.S. interest rates will rise in 2022.

The euro bounced off 16-month lows, meanwhile, helped by better-than-expected business growth in the region.

Currency markets have been mostly driven in recent months by market perceptions of the different paces at which global central banks reduce pandemic-era stimulus and raise rates.

Powell’s renomination supports the view that the Fed is likely to begin raising rates in mid-2022, after it winds down its bond purchase program.

“Markets perceived the outcome as marginally hawkish, and futures now firmed up expectations for a hike in June from having been skewed toward July,” currency analysts at Brown Brothers Harriman said in a note on Tuesday.

Data on Tuesday showed U.S. business activity slowed moderately in November amid labor shortages and raw material delays, contributing to prices continuing to soar halfway through the fourth quarter.

The dollar index was little changed on the day at 96.461, after reaching a 16-month high of 96.61 in overnight trading.

The euro gained 0.16% against the dollar to $1.1251, after earlier hitting a 16-month low of $1.1226.

The euro had tumbled on Monday as concerns grew over new COVID-19 restrictions in Europe, with Austria entering another full lockdown and Germany considering following suit.

Germany’s health minister has called for further restrictions on public spaces.

The euro has some short-term technical support in the $1.1240 – $1.1180 area, which were the highs reached in October and December 2019, Commerzbank technical analysts Karen Jones and Axel Rudolph said in a report on Tuesday. If it breaks below this area, however, it would likely fall to $1.1000, which is the 78.6% retracement of 2020′s move, they said.

The dollar hit a four-and-a-half year high against the Japanese yen of 115.08 yen.

The greenback hit a seven-week high of C$1.2744 against the Canadian dollar, which was hurt by a slide in oil prices, before dropping back to C$1.2682 as oil prices rebounded.

The United States said on Tuesday it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain to try to cool prices after OPEC+ producers repeatedly ignored calls for more crude.

The kiwi dipped 0.13% to $0.6951 before the Reserve Bank of New Zealand is expected to follow up its October rate hike with another 25-basis-point increase at its review on Wednesday.

Turkey’s lira dived 15% in its second-worst day ever after President Tayyip Erdogan defended recent sharp rate cuts and vowed to win his “economic war of independence” despite widespread criticism and pleas to reverse course.

In cryptocurrencies, bitcoin was trading at around $57,644, up 2.4% on the day. Earlier this month it had hit an all-time high of $69,000. Ethereum gained 6.41% to $4,357.

Dollar steadies near 16-month high; New Zealand dollar weakens

The dollar index held near 16-month highs on Tuesday after Federal Reserve Chair Jerome Powell was picked for a second term, reinforcing market expectations that U.S. interest rates will rise in 2022.

Currency markets have been mostly driven in recent months by market perceptions of the different paces at which global central banks reduce pandemic-era stimulus and raise rates.

“Markets are taking every USD strength story they can get in this environment, which is visible in the moves after Powell’s widely expected reappointment,” said Ima Sammani, FX market analyst at Monex Europe.

Sammani said the dollar strength was also due to rising front-end U.S. yields, which was likely caused by commentary from Federal Reserve policymakers. They include Atlanta Federal Reserve President Raphael Bostic, who said on Monday that speeding up the tapering of asset purchases could give the Fed more room for rate hikes in 2022.

Commerzbank’s head of FX and commodity research, Ulrich Leuchtmann, said that the decision to retain Powell was beneficial for the dollar because it showed President Joe Biden respecting the Federal Reserve’s independence from government.

“Biden has proved to be principled with Monday’s nomination,” he wrote in a note to clients.

At 1135 GMT on Tuesday, the dollar index was at 96.489, little changed on the day and slightly below the 16-month high of 96.603 it reached during Asian trading hours .

Versus Japan’s yen, the dollar rose to its highest in four and a half years, as investors expected U.S. interest rates to diverge from those in Japan.

The Japanese currency is sensitive to moves in U.S. Treasury notes, and two-year U.S. Treasury yields rose 8.5 basis points on Monday to their highest since early March 2020.

The dollar-yen move had eased by 1135 GMT, with the pair flat at 114.865, compared to the peak of 115.160 reached earlier in the session .

The euro was up 0.1% against the dollar at $1.12455, recovering slightly after hitting a 16-month low versus the dollar.

Better than expected euro zone PMI data helped push the euro slightly higher on the day.

However, the euro has lost 2.7% so far this month, hurt by a combination of the European Central Bank’s dovish monetary policy stance and, more recently, a resurgence of COVID-19 cases in Europe.

The World Health Organization warned earlier this month that current transmission rates in 53 European countries are of “grave concern” and Germany’s health minister has called for further restrictions on public spaces.

Turkey’s lira slid to a new record low of 12 versus the dollar . This was its eleventh record low in as many days, after President Tayyip Erdogan defended recent rate cuts and vowed to win an “economic war of independence”.

The Australian dollar was down 0.1% at $0.7218 while the New Zealand dollar was down 0.5% at $0.6923.

The Reserve Bank of New Zealand (RBNZ) is expected to deliver a 25 basis point rate hike on Wednesday, but speculation is rife that the central bank could even go for a 50 basis point increase to counter rising inflationary pressures.

The New Zealand dollar was falling versus the U.S. dollar because investors expect short-dated U.S. yields to rise more than short-dated New Zealand yields.

“The repricing in the curve, based upon the RBNZ forward guidance delivered tomorrow, is likely to be less aggressive than what is currently being priced in the U.S. Treasury curve in the run-up to December’s Fed meeting,” Monex Europe’s Sammani said.

“This dynamic is being priced into NZD today.”

In cryptocurrencies, bitcoin was trading at around $56,300. Earlier this month it had hit a new all-time high of $69,000.

Dollar shines, euro suffers as Covid fears flare over Europe

The safe-haven U.S. dollar traded close to a 16-month high to the euro on Monday on growing anxiety over the impact of surging Covid-19 infections in Europe, with Austria reimposing a full lockdown and Germany considering following suit.

The greenback was near its strongest since early October against the riskier Australian and Canadian dollars, with the commodity-linked currencies also pressured by a slump in crude oil.

The dollar got additional support from bullish comments by Federal Reserve officials Richard Clarida and Christopher Waller on Friday who suggested a faster pace of stimulus tapering may be appropriate amid a quickening recovery and heated inflation.

An more rapid end to tapering raises the possibility of earlier interest-rate increases too. Currently the market is priced for the Federal Open Market Committee (FOMC) to start hiking rates by the middle of next year.

The dollar index, which gauges the currency against six major peers, traded at 96.065, staying within sight of last week’s 16-month high of 96.266.

The euro slumped 0.23% to $1.1274, approaching its lowest since July of last year at $1.1250, reached Friday, when it tumbled 0.66%.

“EURUSD has been in free-fall and will likely get the lion’s share of attention from clients looking for a play on growing restrictions and tensions across Europe,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a note to clients.

“For momentum, trend followers and tactical traders, short EUR remains attractive here.”

Europe has again become the epicenter of the pandemic, accounting for half of global cases and deaths.

A fourth wave of infections has plunged Germany, Europe’s largest economy, into a national emergency, Health Minister Jens Spahn said, warning that vaccinations alone will not cut case numbers.

Austria becomes the first country in western Europe to reimpose a full Covid-19 lockdown from Monday.

Worries that a slowdown in Europe could hit energy demand dented crude oil, which was also in retreat over the prospect of a U.S.-led release of emergency stockpiles.

The dollar added 0.21% against the oil-linked Canadian loonie to C$1.26575, closing in on Friday’s high at C$1.2663, the strongest level since Oct. 1.

The Aussie eased slightly to $0.7234, and earlier dipped as low as $0.72285, the cusp of a low since Oct. 6.

“We expect AUD to remain heavy in the near-term (and) a dip to $0.70 is possible,” with a slowing Chinese economy and the Reserve Bank of Australia’s dovish policy stance dragging on the currency, Joseph Capurso, a strategist at Commonwealth Bank of Australia, wrote in a report.

Meanwhile, “USD can extend its recent rally this week and set a fresh 2021 high,” he said. “Another round of strong U.S. inflation can further propel market pricing of FOMC rate hikes and the USD.”

The dollar was largely flat against fellow safe-haven the yen, changing hands at 114.03 yen per dollar, in the middle of its range over the past week and a half.

In crypto, bitcoin traded around $58,100, consolidating after its retreat from an all-time high at $69,000, marked earlier this month.

Dollar near 16-month high versus euro ahead of U.S. retail sales data

The dollar held just below a 16-month high versus the euro on Tuesday, while the yuan reached its strongest in more than five months as markets welcomed dialogue between the U.S. and Chinese presidents.

U.S. President Joe Biden and Chinese leader Xi Jinping stressed their responsibility to the world to avoid conflict, in talks which gave Asian currencies a lift overnight. But support for riskier currencies ebbed somewhat as the talks did not appear to lead to any particular breakthrough.

The dollar hit a five-month low against China’s offshore yuan overnight, at 6.3615, and the pair was still down around 0.1% on the day at 0850 GMT, at 6.3767.

But the Australian dollar — seen as a liquid proxy for risk appetite — had lost its overnight gains by early European trading, down 0.1% on the day at $0.73425.

The dollar index was a touch lower at 95.446, having rallied to its highest in 16 months after U.S. inflation data last week showed consumer prices surged to their highest rate since 1990, fueling speculation that the Federal Reserve may raise interest rates sooner than expected.

Investors are waiting for U.S. retail sales data due later in the session, which could also influence the outlook for interest rates.

The euro was little changed on the day, having extended recent losses on Monday after dovish comments from European Central Bank President Christine Lagarde.

Lagarde said that tightening monetary policy now to rein in inflation could choke off the euro zone’s recovery, comments which were viewed as pushing back on calls and market bets for tighter policy.

“Even if lower-than-consensus economic data are released this afternoon in the U.S., including retail sales and industrial production, we doubt that this is likely to alter the scenario now that selling EUR-USD into rally remains favored,” UniCredit strategists wrote in a client note.

Analysts also said that rising COVID-19 cases in Europe were hurting European currencies including the euro.

On Monday Austria imposed a lockdown on unvaccinated people, while Germany’s parliament is due to vote on Thursday on stricter measures to deal with surging cases. France, the Netherlands and many countries in Eastern Europe are also experiencing a surge in infections.

“The fear that the situation could escalate and result in a more significant tightening of restrictions in the coming months is hurting sentiment towards European currencies,” MUFG currency analyst Lee Hardman said in a client note.

The British pound was up 0.4% against the dollar at $1.3467, having risen after data showed British employers hired more people in October after the government’s job-protecting furlough scheme ended.

The Swedish crown was up around 0.2% against the dollar at 8.789. Swedish headline inflation hit its fasted pace since 2008 in October, data on Monday showed.

“We assume that the Riksbank will call the rise in inflation temporary at its meeting next week,” wrote Commerzbank FX and EM analyst You-Na Park-Heger in a client note.

Elsewhere, the cryptocurrency bitcoin was down around 4.5% on the day, at $60,750.

Euro crumbles, traders wait on U.S. consumer test

The euro was huddled at a 16-month low on Tuesday while the dollar was firm as traders awaited U.S. retail sales data, wary a strong reading could stoke inflation and add pressure on the Federal Reserve to hike rates.

Talks between U.S. President Joe Biden and his Chinese counterpart Xi Jinping during the Asia session are also likely to set the tone in financial markets, and currency moves were slightly ahead of any outcome from the discussion.

The yuan was steady at 6.3812 per dollar offshore.

Overnight the euro had crumbled below $1.14 for the first time since July last year amid concerns about Covid-19 outbreaks and as Europe’s central bank chief pushed back against the need to act to tame inflation.

The common currency steadied at $1.1361 after falling as far as $1.1356 on Monday and the drop helped the U.S. dollar index to a 16-month high of 95.595. The dollar was also firm against the yen overnight and broadly steady elsewhere.

It last bought 114.14 yen while the euro sat near the one-month low of 129.64 yen it touched on Monday.

“If we were to take any tightening measures now, it could cause far more harm than it would do any good,” European Central Bank President Christine Lagarde had told European Union lawmakers, a contrast with hawkish hints from elsewhere.

“We expect the cautiousness of the ECB on policy to limit recovery prospects for the euro against the dollar in the coming months,” said Rabobank senior FX strategist Jane Foley.

“Our current mid-2022 forecast of EUR/USD at $1.14 is looking outdated … we will be revising our forecasts later in the week.”

The gulf in tone across the Channel sent the euro on its steepest slide against the pound in six months as Bank of England Governor Andrew Bailey told a parliamentary committee he was “very uneasy” about inflation.

Canada’s central bank chief Tiff Macklem was even more forthright and said “we are getting closer” to rate hikes in a Financial Times opinion piece, driving the Canadian dollar to a four-and-a-half year high against the euro.

Ahead of U.S. retail sales data due at 1330 GMT Australia is in focus with Reserve Bank of Australia (RBA)Governor Philip Lowe making a speech on inflation.

Hawkishness would be a surprise after minutes from this month’s meeting showed the bank still expects it will keep rates on hold at record lows until 2024 even though it acknowledged upside risks on inflation.

“The risks are tilted towards AUD/USD weakness today given the large gap between market pricing for rate hikes in 2022 and RBA rhetoric,” said Commonwealth Bank of Australia analyst Joe Capurso.

The Aussie was last hovering at $0.7346, just below its 50-day moving average of $0.7362. The kiwi is awaiting a Reserve Bank of New Zealand meeting next week and was steady at $0.7040.

Sterling sat at $1.3411.

The U.S. consumption data follows a surprisingly weak consumer sentiment reading last week and an unexpectedly strong Empire State business conditions survey, which had lifted Treasury yields overnight.

It is forecast to show sales accelerating.

“In our view, the forecasts point to decent data, which following last week’s acceleration in the U.S. CPI could increase bets over a hike by the Fed as soon as the tapering process is over,” said Charalambos Pissouros, head of research at JFD Group in Cyprus in a note to clients.

Dollar at 2021 high after hot U.S. inflation

The dollar hit 2021 highs against sterling and the euro on Thursday, while the yen was smarting from its sharpest drubbing in a month, after the hottest U.S. inflation reading in a generation fanned bets on rate hikes.

U.S. consumer prices grew at their fastest annual pace since 1990 last month, data showed, and traders think the Federal Reserve could respond by lifting interest rates faster than peers in Europe and Japan.

The euro was pummeled, as the European Central Bank is seen lagging on policy tightening, and it slipped further to $1.1465 on Thursday, its lowest since July 2020. It is without major chart support until around $1.12.

Sterling was also marginally down at a fresh 11-month low on Thursday of $1.3393. The yen extended a sharp reversal of recent gains to 114.15 per dollar and the Australian and New Zealand dollars made one-month troughs.

“The market is still conferring a degree of credibility on the Fed, that they are not going to allow very high inflation to persist indefinitely,” said National Australia Bank’s head of FX strategy, Ray Attrill.

Even if other central banks are eyeing similar moves, a dollar index move above 95 might prompt investors to get out of the way of a rising greenback, he added.

“It’s quite a big level technically and if we can break up through that then there will be more people throwing in the towel.” The index ticked up to 95.002 on Thursday.

Emerging markets currencies have also suffered from the dollar’s broad rise, with MSCI’s EM currencies index making its sharpest drop in two months.

The surge in Treasury yields, which rise when prices fall, has opened up the difference between five-year U.S. yields and yields at the same tenor in Japan and Germany to their widest – in favor of Treasuries – since early 2020.

Elsewhere on Thursday, Japanese wholesale inflation hit a four-decade high.

A jobs report in Australia showed an unexpected rise in unemployment, though the timing of the report — in the midst of staggered lifting of pandemic lockdowns of big cities – made the figures difficult to interpret.

The Australian and New Zealand dollars nevertheless slipped, with the Aussie down 0.4% at a one-month low of $0.7298 and the kiwi down 0.3% at $0.7038.

Further dollar gains likely depend on clues about the Fed’s thinking, and on whether the inflation jump – which also sparked selling in stock markets – puts a broader weight on the mood.

“From an FX standpoint we are in a stand-off,” said Deutsche Bank strategist Alan Ruskin.

“On the dollar we have the classic dilemma – if Fed won’t respond to high inflation it is dollar negative; if the Fed brings forward tightening it is USD positive. Right now the dollar is broadly stuck between these two worlds.”

British growth data is due later in the day.

Dollar firm as U.S. inflation poses next test

The dollar made a steady start to the week on Monday but was kept below Friday peaks, as currency traders seek a path between markets’ volatile interest rate projections and central bankers vowing to keep rates low even as inflation surges.

Figures due Wednesday are expected to show U.S. consumer price growth running hot at 5.8% year-on-year, the next big test of faith in the Federal Reserve’s insistence it will be patient with interest rate hikes.

In early Asia trade, the dollar was marginally higher against the yen and crept from a one-week low to 113.49 yen.

After briefly touching a 15-month top of $1.15135 on the euro in the wake of strong U.S. labor data on Friday, the greenback steadied at $1.1566 per euro.

Sterling, which was walloped when the Bank of England surprised traders by holding rates steady last week, fell to a five-week low of $1.3425 on Friday, before bouncing to hold at $1.3487 on Monday.

The Bank of England’s surprise triggered a sharp reversal late last week in what had become quite aggressive bets on imminent rate hikes in Britain and globally, while stocks have meandered higher through the maelstrom in bond markets.

“Central banks have distorted a whole lot of markets, pumping up the equity market and pumping up the bond market,” said Jason Wong, a strategist at Bank of New Zealand in Wellington.

“Currencies are sort of in the middle of all that, wondering what the hell’s going on,” he said, with the market seemingly in a holding pattern but with risks building up, especially in China where a slowing economy brings global implications.

The risk-sensitive Australian and New Zealand dollars struggled to make much headway in early trade, with the Aussie pinned just below $0.74 and the New Zealand dollar around $0.7108.

“AUD/USD risks remain skewed to the downside this week in our view,” said Kim Mundy, an analyst at Commonwealth Bank of Australia, especially if U.S. inflation data is strong or if Australian employment data on Thursday is particularly weak.

“A dip towards $0.7300 is possible,” she said.

Elsewhere, weekend data showed Chinese exports unexpectedly strong, but imports unexpectedly soft in another indicator of underwhelming demand, especially as China tightens movement restrictions to keep a lid on Covid-19.

The Communist Party begins a meeting on Monday which is expected to pass a resolution in praise of President Xi Jinping and lay the groundwork for a third term of his leadership.

Traders are also looking ahead to Chinese producer and consumer price data due on Wednesday, with annual producer price growth seen surging to 12% in perhaps a harbinger of further price pressure to come through global supply chains.

The Chinese yuan was marginally weaker in early trade at 6.3951 per dollar. The U.S. dollar index was flat at 94.225, putting it roughly in the top half of a range it has traded for a little more than a month.

Dollar hovers near peaks as Fed heads for taper

The dollar hovered near recent peaks versus the euro and the yen on Wednesday as investors waited for the U.S. Federal Reserve to start unwinding its pandemic-era stimulus and to assess Chair Jerome Powell’s take on inflationary pressures.

Moves were small in Asia and at the start of the European trading day in the middle of a busy week for central banks, with the Bank of England meeting on Thursday.

The dollar index traded unchanged on the day at 94.11 , close to its 2021 peak of 94.563 hit last month.

Against the euro the greenback was also flat at $1.1579 , near the $1.1522 low reached in October and which marked the strongest level for the dollar since July 2020.

Dollar/yen traded at 113.94, near a four-year high .

The Fed is expected to announce the tapering of its $120 billion-a-month asset purchase programme in its policy statement at 1800 GMT.

Traders are focused on clues around what that means for rate rises, after a month of seismic bond market moves in anticipation of hikes as soon as next year.

Analysts are divided as to what the Fed meeting and statement will mean for the dollar.

“The dollar bearish case today is that the tapering is widely expected and an inherently dovish Fed, concerned about upsetting the bond market, does not change its statement substantially,” ING strategists wrote.

“Yet at some point, the Fed is going to have to acknowledge that elevated inflation does not ‘largely reflect transitory factors’. Many dovish central banks around the world are already doing this and should the Fed start to show greater concern about this today, U.S. rates and the dollar could get a boost.”

Investors will watch closely for Chair Powell’s assessment of inflation after other central banks have signalled a more hawkish tilt in the face of rising price pressures, although whether that means higher interest rates soon is still to be seen.

“Fed Policy is under challenge in ways that cannot be remembered since the early Volcker years,” said Deutsche Bank strategist Alan Ruskin.

“Inflation is taking off with an economy that has been pricing itself off zero nominal rates and dramatic negative real rates for the last 18 months,” he said.

A day ago, the Reserve Bank of Australia abandoned its short-term yield target and dropped its expectation of holding rates at record lows until 2024, though the Aussie fell because the bank also pushed back on aggressive pricing for 2022 hikes.

The Aussie had dropped 1.2% against the dollar on Tuesday and sat at $0.7448 on Wednesday, up 0.3% from the session open. The kiwi was also dragged 1% lower, but found support on Wednesday from strong labour data and hovered at $0.7134, up 0.3%.

Money markets are pricing in a 15 basis point hike from the Bank of England on Thursday, although a weaker pound this week suggest some nervousness that the BoE could disappoint.

Sterling fell to a two-week low at $1.3606.

Dollar wallows near one-month low as strong euro, stock rally weigh

The dollar languished near its weakest level in a month against major peers on Friday, hurt by a stronger euro as traders bet on earlier European interest rate hikes and as an equity rally sapped demand for safer assets.

New Zealand’s dollar sagged amid a slide in consumer confidence, while cryptocurrency ether climbed to a record high.

The dollar index, which measures the currency against six main rivals including the euro, was little changed at 93.354, close to Thursday’s low at 93.277 — a level not seen since Sept. 27.

The euro was largely flat at $1.16855 after rising as high as $1.1692 overnight for the first time since Sept. 28.

Against the yen, another traditional safe haven, the dollar was mostly unchanged at 113.50, continuing to ease back gradually from the almost three-year high of 114.695 reached last week.

An index of global shares rose to the cusp of a record peak this week, powered by an earnings-driven rally to consecutive record highs on Wall Street, including overnight.

The euro was propelled on Thursday after comments by European Central Bank President Christine Lagarde were interpreted in some quarters as not going far enough in affirming the central bank’s dovish stance.

Foreign-exchange markets have become volatile around central bank activity. Big moves began Wednesday with hawkish comments from the Bank of Canada, and were followed on Thursday with an action by the Reserve Bank of Australia and the ECB’s remarks — all ahead of meetings next week of the U.S. Federal Reserve and the Bank of England.

The Fed is widely expected to begin to taper stimulus from next month, with interest rate lift-off following next year.

Lagarde’s “pushback was not forceful enough,” opening the way for the euro to test $1.1680 in the near term, TD Securities strategists wrote in a note.

However, “extrapolating (euro strength) beyond that seems like a big ask a week ahead of the Fed’s meeting where taper will be announced,” they said.

Traders will have their eyes on economic gauges from both regions later in the day, with Europe seeing a preliminary reading of the consumer price index, while the U.S. gets personal spending and income data.

Elsewhere, sterling was almost flat at $.1.37925 as it continued to fluctuate near a one-month high reached last week.

The pound has been buffeted recently by speculation over whether the Bank of England would proceed with an interest rate hike at its meeting next week.

The Australian dollar was largely unchanged at $0.75425, after reaching the highest since early July at $0.75555 in the previous session.

That uptick was fueled when the RBA declined to buy a government bond at the heart of its stimulus program, fanning speculation the central bank will allow rates to rise earlier than expected. The central bank again resisted buying the key bond earlier on Friday.

The New Zealand dollar fell 0.3% to $0.71795 after a gauge of consumer confidence dipped sharply in October.

In cryptocurrencies, ether rose to a record $4,400, while bigger rival bitcoin also gained to trade around $62,000, but down from the record $67,016.50 reached last week.

Dollar edges lower, Australian dollar calms after inflation jump

The U.S. dollar slipped as European markets opened on Wednesday, while the Australian dollar pared gains, having jumped following surprisingly strong inflation data which raised the possibility of sooner-than-planned rate hikes.

Currency markets have been generally quiet in recent sessions as investors wait for the U.S. Federal Reserve meeting next week.

Investors are also looking to policy announcements this week from the European, Canadian and Japanese central banks for clues on the outlook for rates amid a backdrop of supply-side driven global inflation pressures.

At 0802 GMT, the U.S. dollar index was down less than 0.1% at 93.877.

Short-term U.S. Treasury yields spiked overnight as investors bet that inflation would bring forward interest rate rises.

Standard Chartered FX analysts wrote in a client note that they expect currency market risk sentiment to be limited until the Fed next week, where “hawkish risks are still under-priced”.

The Australian dollar was up 0.2% at $0.7513, having reached as high as $0.7536 overnight after data showed that Australian core inflation sped to a six-year high in September, surprising the market. The data prompted a spike in short-term yields.

The Reserve Bank of Australia meets on Tuesday next week and market pricing is at odds with RBA policymakers’ insistence that there will be no rate hikes before 2024.

“The Reserve Bank of Australia (RBA) might be forced into action after all,” wrote Commerzbank analyst Antje Praefcke in a note to clients, referring to rising 3-year yields.

“The market is likely to increasingly assume that the RBA will have to rethink its expansionary monetary policy further due to economic and inflationary developments, which is likely to principally support AUD.”

The U.S. dollar was down around 0.4% against Japan’s yen, with the pair changing hands at 113.745 – still within recent ranges and close to the four-year high of 114.695 the dollar touched against the yen one week ago.

“Short-JPY positions have clearly become a very popular trade among speculators… but it still seems hard to see the yen finding sustained support at the moment,” wrote ING FX strategists in a client note.

“115.00 in USD/JPY now appears a matter of when, rather than if.”

The Bank of Japan meets on Thursday and is widely expected to downgrade its economic assessment, with markets betting on no rate hike in the foreseeable future.

The Canadian dollar was little changed at $1.2402 ahead of Canada’s central bank policy announcement later in the session.

The central bank is expected to raise its inflation forecast and to largely end stimulus from its pandemic-era bond buying program, starting a countdown of sorts to the first interest rate hike since October 2018

The euro was up around 0.1% at $1.1605. The European Central Bank, which meets on Thursday, is expected to take a dovish stance.

The British pound was down 0.2% against the euro at 84.39 pence per euro. The UK’s budget forecasts will be unveiled later in the session but are not expected to impact the pound.

In cryptocurrencies, bitcoin was down 2% at around $59,114 , having been knocked off the all-time high of $67,016.50 it reached last week.