The US dollar remains firm

US dollar calm ahead of consumer inflation 

The US dollar spiked higher intra-day overnight after another Fed official joined the tapering bandwagon. The rally soon faded, though, as US yields moved slightly lower. The dollar index finished almost unchanged at 92.61, despite testing 92.90 during the session. It is unchanged in yet another wait-and-see Asian session.

It was much the same across the other major currencies, which fell versus the greenback intraday before rallying to finish almost unchanged for the day in New York. EUR/USD is trading at 1.1815, midway between support resistance at 1.1750 and 1.1850. GBP/USD is at 1.3845, midway between support resistance at 1.3800 and 1.3900. USD/JPY did not move overnight and is at 100.07 this morning, while markets wait for a break of its multi-week 109.50/110.50 range. AUD/USD and NZD/USD had a quiet overnight session before easing by 0.20% in Asia to 0.7250 and 0.7110, respectively. Higher US inflation tonight could send both sharply lower with support at 0.7340 and 0.7080 the levels to watch.

Except for the Singapore dollar, AsiaFX retreated modestly overnight, with the US dollar holding onto those gains. Notably, USD/MYR has risen to 4.1475 this morning, with the ringgit receiving no boost from higher oil prices. The new government honeymoon could be over as soon as it started. Especially as the new Prime Minister looks set to appoint former PM Najib Razak as an economic advisor. Seriously, you couldn’t make this up.

G-10 and Asian currencies look set to remain slightly offered versus the US dollar until the US inflation data this evening as markets remain torn between inflation nerves and tapering and peak recovery. The data may help to answer some of those questions, but in all likelihood, we are likely to see US dollar strength modestly continue into next week’s FOMC.

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