The dollar remained stable on Friday as expectations that the Federal Reserve would need to maintain higher interest rates longer were rekindled by stronger-than-expected U.S. consumer inflation.
Simultaneously, investors processed Chinese producer and consumer price data indicating slightly higher than anticipated deflationary pressures.
According to ING’s head of research Rob Carnell, “what we’ve got is a fairly weak growth story (from China), and that’s weighing on the price numbers,” which could increase pressure on the government to assist the economy more.
News earlier this week revealed that as the government gets ready to unleash yet another round of stimulus to help the economy reach the official growth target, China is thinking of increasing its budget deficit for 2023.
Carnell continued, “But I would hasten to say, I don’t think we’re expecting anything big” in terms of stimulus.
China’s imports and exports fell 6.2% and 6.2%, respectively, in September compared to the same month last year, according to customs data released on Friday. These figures indicate that the world’s second-biggest economy is stabilising, but at a slower rate.
At $7.3081, the offshore Chinese yuan was essentially unchanged against the US dollar.
The Australian dollar, which is frequently used as a stand-in for growth in China, was up 0.2% at $0.6327.
The kiwi fell to $0.592 by roughly 0.1%.
A spike in rental rates in September drove up U.S. consumer prices, according to statistics released on Thursday. The Fed was not expected to raise interest rates next month, despite a consistent moderating of underlying inflation pressures, but the data did increase the likelihood that rates would remain high for some time.
According to a note from David Doyle, head of economics at Macquarie, “CPI data for September reveal further challenges with the ‘last mile’ in pushing inflation persistently back towards the 2% target.”
The dollar index, which compares the value of the US dollar to six major competitors, decreased somewhat in the Asian morning to 106.42 but remained close to its peak of 106.60 on Thursday.
The yen fell again towards the vulnerable 150-line that was briefly hit last week due to the increase in the value of the US dollar overnight.
The exchange rate stood at 149.80 yen to the dollar, and traders were bracing themselves in case the Japanese government decided to step in and shore up their currency should it continue to deteriorate.
According to DBS’s Wei Liang Chang, a foreign exchange and credit analyst, “dollar/yen remains restrained below 150 amid concerns that the authorities could lean against excessive JPY weakness.”
In other news, the euro recovered slightly from its overnight decline versus the dollar, closing at $1.05445, up over 0.1%.
The most recent price of sterling was $1.2205.