© Reuters. Banknotes of Japanese yen are seen in this illustration picture taken June 15, 2022. REUTERS/Florence Lo/Illustration/file photo
By Iain Withers
LONDON (Reuters) – The dollar broadly held its ground against other major currencies on Wednesday, while sterling fell sharply after British inflation data showed a slowing of the headline rate to its lowest in more than two years.
Sterling was the biggest mover among major currencies, after official data showed British inflation fell in November and came in well below expectations, causing markets to bring forward bets on when the Bank of England will cut interest rates.
The – which tracks the U.S. currency against six peers – was last up 0.1% at 102.26, helped in part by the move lower in sterling, last down 0.5% at $1.26620.
Currency analysts at MUFG said in a note that there was unlikely to be a fresh catalyst for significant dollar moves until the U.S. publishes its own inflation data on Friday.
U.S. Federal Reserve officials have been pushing back on the idea of rapid rate cuts next year, after last week’s meeting prompted markets to pencil in three cuts in 2024, sparking a rally in financial markets.
“The reality for the Fed is that pushing back on the idea of rate cuts will prove difficult if the inflation readings continue to fall faster than expected,” the MUFG analysts said.
The dollar fell 0.3% against the yen to 143.415, a day after the Bank of Japan maintained its ultra-loose monetary policy and opted to await more evidence to justify a shift.
“The last thing (the BOJ) wants to do is to have to undo (a rate hike) again in a couple of months’ time,” Rob Carnell, Asia-Pacific head of research at ING, said.
“It’s not a great environment to be hiking. (The BOJ) really wants to be sure that the domestic situation is looking OK,” he added.
The euro eased 0.2% to $1.09580.
In cryptocurrencies, bitcoin gained 1.3% to $42,821.