The dollar held firm on Friday after
stronger-than-expected US consumer inflation revived prospects that the Federal
Reserve will have to keep rates higher for longer.
At the same time, investors digested producer and
consumer prices data out of China that showed deflationary pressures were
slightly stronger than expected.
“What we’ve got is a fairly weak growth story (from
China), and that’s weighing on the price numbers,” according to Rob Carnell,
head of research at ING, who said that could put more pressure on the
government to further support the economy.
Bloomberg News reported earlier in the week that China
is considering raising its budget deficit for 2023 as the government prepares
to unleash a new round of stimulus to help the economy meet the official growth
target.
“But I would hasten to say, I don’t think we’re
expecting anything big” as far as stimulus, Carnell added.
China’s exports for September shrank by 6.2 per cent
from a year earlier, while imports also declined by 6.2 per cent, customs data
showed on Friday, both contracting at a slower pace and adding to recent
evidence that the world’s second-biggest economy is stabilising.
The offshore Chinese yuan was mostly flat versus the
greenback at $7.3081.
The Australian dollar, which often trades as a proxy
for China growth, was 0.2 per cent stronger at $0.6327. The kiwi eased about
0.1 per cent to $0.592.
US consumer prices were pushed higher by a jump in
rental costs in September, data showed on Thursday. Although a steady
moderation in underlying inflation pressures supported expectations that the
Fed would not hike interest rates next month, the data did raise the chance of
rates staying elevated for some time.
“CPI data for September reveal further challenges with
the ‘last mile’ in pushing inflation persistently back towards the 2 per cent
target,” said David Doyle, Macquarie head of economics, in a note.
The dollar index, which measures the US currency
against six of its major peers, ticked down slightly to 106.42 in the Asian
morning, but held near Thursday’s high of 106.60.
The boost to the greenback overnight saw the yen sliding
back toward the sensitive 150-line briefly touched last week.
The exchange rate was sat at 149.80 yen per dollar,
with traders on guard for potential intervention by Japanese authorities to
support their currency should it weaken further.
DBS foreign exchange and credit strategist Wei Liang
Chang said, “Dollar/yen remains restrained below 150 amid concerns that the
authorities could lean against excessive JPY weakness.”
Elsewhere, the euro ticked up over 0.1 per cent to
$1.05445 after taking a tumble overnight against the dollar. Sterling was last
trading at $1.2205.
Reuters
