By Kevin Buckland
TOKYO (Reuters) – The dollar neared five-week highs against its major counterparts on Monday as investors increased their bets on the Federal Reserve holding monetary policy tighter longer, awaiting a consumer price report in the states. States that will be published the next day.
The yen tumbled, with the Japanese government set to nominate a candidate who supports the current policy stance as the new central bank governor on Tuesday.
Risk-sensitive Australian and New Zealand dollars fell along with Asian equities on concerns that rising US rates stifle growth. The pound also fell.
“The dollar was well supported by much stronger-than-expected US jobs data earlier this month, and Fed comments leaning more to the hawkish side, but obviously the focus is on the CPI of tomorrow,” said Shinichiro Kadota, senior FX strategist at Barclays Tokyo.
“I think the market is more concerned about upside risks to inflation, rather than downside risks.”
Ahead of Tuesday’s CPI report, revisions to the previous data set showed that consumer prices rose in December instead of declining as previously estimated.
Separately, University of Michigan polls showed a one-year inflation outlook of 4.2%, higher than the final January number. Fed Chairman Jerome Powell cited the Michigan survey as one of the indicators the US central bank tracks.
Money markets are positioned for US interest rates to peak just below 5.2% around July, versus the current target rate of 4.5-4.75%.
The dollar index – which measures the greenback against six counterparts including the yen, euro and sterling – gained 0.068% to 103.65, staying close to Tuesday’s high of 103.96, its strongest level since 6 January.
The US currency rose 0.6% to 132.20 yen.
Sources said on Friday that former Bank of Japan board member Kazuo Ueda is set to become the next governor. In an interview the same day, Ueda said it was appropriate for the BOJ to maintain its current ultra-accommodative policy.
“Markets are starting to understand that the new governor will not be as aggressive as (investors) initially thought,” said Naka Matsuzawa, chief strategist at Nomura in Tokyo.
“His stance on current policy is more balanced, or a little dovish,” which will keep the yen weak, Matsuzawa said.
The euro fell 0.09% to $1.06685, and earlier hit $1.0656 for the first time since Jan. 9. The pound sterling last traded at $1.20475, down 0.1% on the day.
The Aussie fell 0.09% to $0.6912, and the New Zealand kiwi lost 0.11% to $0.6304.
(Reporting by Kevin Buckland; Editing by Shri Navaratnam and Simon Cameron-Moore)