FOREX-Dollar Maintains Recent Ranges After Weak US Inflation

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* Chart: global exchange rates tmsnrt.rs/2RBWI5E

LONDON, Sept. 15 (Reuters) – The dollar held in recent ranges relative to its peers on Wednesday after weaker-than-expected U.S. inflation figures tempered immediate expectations of the Federal Reserve’s cut while that disappointing Chinese data weighed on the yuan and the aussie.

The dollar index stood at 92.536, around 0.2% lower on Tuesday, when it fell on inflation data to recover only on safe-haven demand as stocks were slipping on Wall Street.

The index has hovered between 92.3 and 92.9 over the past week, with several Fed officials suggesting that the US central bank may reduce its debt purchases by the end of the year, even after a much lower than expected salary report earlier this month.

While high inflation kept the pressure on policymakers, overnight data showed that the U.S. consumer price index, excluding the volatile components of food and energy , had risen only 0.1% last month.

The Federal Open Market Committee (FOMC) is holding its monetary policy meeting next week, with investors keen to know if a cut announcement will be made.

Tapering tends to benefit the dollar as it suggests that the Fed is one more step towards tightening monetary policy. It also means that the central bank will buy less debt assets, thus reducing the number of dollars in circulation.

“In the end, the inflation numbers provided no answer to the market dilemma about when to cut the Fed,” Francesco Pesole, G10 FX strategist at ING said in a note to clients.

“The rapid reversal of dollar weakness, however, might suggest that a brief delay in announcing the cut (i.e. in November instead of September) may not be enough to generate a trend. sustained decline in the dollar. After all, the dollar has recently been supported by the narrative of a potential combination of monetary tightening and slower growth over the medium term: it’s no surprise that a marginal fall in inflation has contributed very little to allay those concerns.

One euro bought $ 1.1816 on Wednesday, mostly flat from the previous session.

European Central Bank Chief Economist Philip Lane speaks at the IMFS webinar later today.

The dollar slipped slightly to a 3-week low of 109.44 yen, remaining near the center of the last two-month trading range.

The Commonwealth Bank of Australia is more bullish on the outlook for the dollar, predicting that accelerating US employment costs will keep consumer prices high.

“Inflation above target will prove to be more persistent than the FOMC expects,” CBA strategist Carol Kong wrote in a report.

“The implication is that the FOMC will likely have to raise the fund rate more than what the markets are currently expecting, which could support the USD on the trail.”

Meanwhile, the yuan and Australian dollar fell after Chinese data showed growth in factory and retail sales slowed more sharply than expected last month.

Adding to China’s wider concerns in financial markets is a press report that ailing real estate developer China Evergrande Group will not be able to pay interest on its debt next week.

The yuan extended its decline for the day to 6.4433 yuan to the dollar before trading about 0.1% lower at 6.4410, threatening to break a five-day streak of gains.

The Aussie fell to $ 0.73015 for the first time in more than two weeks after data from China, but recovered to hardly change at $ 0.7320.

Reporting by Ritvik Carvalho; Editing by Toby Chopra


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