FOREX-commodity gains constrain the dollar ahead of inflation data

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* Chart: Global exchange rates https://tmsnrt.rs/2RBWI5E

* Rising commodity prices push up exporters’ currencies

* The dollar passes the US CPI and Fed speakers

* British pound continues stellar race as coronavirus risks recede

By Stanley White and Tom Westbrook

TOKYO / SINGAPORE, May 11 (Reuters) – The dollar hovered near its multi-month low on Tuesday, as high commodity prices supported exporters’ currencies, although cautiousness over U.S. inflation led to rate hikes prevented the greenback from slipping.

The resource-sensitive Australian dollar hit Monday’s two-month high and held steady around $ 0.7831. The similarly exposed Canadian currency, which hit an almost four-year high on Monday, held steady at C $ 1.2096 per dollar. The New Zealand dollar traded near its highest since February.

The British pound was also perched near its March high on the dollar and strongest since early April on the euro, as investors applauded the easing of the lockdown and reduced risk of another referendum on the independence of Scotland.

However, further moves were controlled by the looming US consumer price figures expected on Wednesday, with traders worried that large numbers could prompt the Fed to back down on monetary policy support earlier than expected.

The appearances later Tuesday of U.S. Federal Reserve members John Williams, at 2:30 p.m. GMT, and Lael Brainard, at 4:00 p.m. GMT, will be analyzed for clues as to the central bank’s thinking.

The euro was broadly flat at $ 1.2142 after hitting a two-month high on Monday and the yen held steady at $ 108.81 to the dollar.

The South Korean won and the Taiwanese dollar fell, however, alongside a decline in their technology-intensive stock markets and a wider sell-off of growth stocks on Wall Street and Asia amid concerns over the market. inflation.

“There are a lot of cross currents,” Bank of Singapore currency analyst Moh Siong Sim said, as the surge in commodity prices on the one hand lifts commodity currencies and on the other. hand, adds to the inflationary pressure that has agitated risky assets.

“The big question is whether the Fed can be comfortable staying dovish,” he said. “If inflation rises more than the Fed expects … what will happen to the Fed then?”

FED TEST

Markets expect inflation in the United States to hit 3.6% year over year in April, due to the base effect of a pandemic year contraction.

But investors seem increasingly to disagree with policymakers over whether this kind of price growth will persist, and have pushed up the US five-year thresholds – a measure of inflation expectations – to 2.717. %, a decade high on Monday.

Fed Chairman Jerome Powell has shown every sign of remaining patient with politics even as the economy turns hot. However, Dallas Fed Chairman Robert Kaplan caused a stir last month by calling to start talking about cuts, and there are growing signs that prices could continue to rise quickly if they don’t. are not controlled.

The biggest rise in factory gate prices in China in more than three years is the latest signal that surges in commodity prices are heading down the supply chain to end consumers.

China’s producer price index in April rose 6.8% from a year earlier, official data showed, ahead of a 6.5% rise announced by a Reuters survey of analysts.

There is still more pressure to come as the full implications of a global chip shortage make their way through production lines, said Iris Pang, chief China economist at ING.

“Even bags that don’t contain a chip use chips in the production process,” she said. “This chip inflation can be passed on to consumers and lead to a faster rate of CPI growth if the chip shortage persists.”

Profit-taking pulled copper and wood off their record highs, but iron ore continued to advance and soaring currencies mostly held onto gains. The Canadian dollar is within reach of a six-year high and the Chilean peso, a copper exporter, is near its best since 2019.

(Report by Stanley White in Tokyo and Tom Westbrook in Singapore edited by Shri Navaratnam and Jacqueline Wong)



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