SINGAPORE- The dollar fell to a seven-month low against major peers on Monday while the yen spiked to an over seven-month peak as traders ramped up bets that the Bank of Japan may make further tweaks to its yield control policy at its meeting this week.
The Aussie breached the key $0.7000 level for the first time since August, and last rose 0.54 percent to $0.7013, after rising as high as $0.7019 earlier in the session.
Similarly, the euro hit a fresh nine-month top of $1.08725, and was last 0.3 percent higher at $1.0867.
Against a basket of currencies, the US dollar index slumped 0.46 percent to a seven-month trough at 101.79, as the greenback extended its selloff from last week after data showed that US consumer prices fell for the first time in more than 2-1/2 years in December.
With decades-high inflation in the world’s largest economy showing signs of cooling, investors are now betting that the Fed may be nearing the end of its rate-hike cycle, and that rates would not go as high as previously feared.
“The confirmation of a deceleration in price pressures is building up hopes that CPI could fall further in coming months,” said analysts at OCBC.
“An entrenched disinflation trend can reinforce expectations that the Fed could again scale back on its pace of hike beyond the February FOMC or even position for an earlier pause or dovish pivot.”
The Fed’s aggressive rate increases have been a huge driver of the greenback’s 8 percent surge last year.
Markets are now pricing in a 91 percent chance of a 25 basis point increase by the Fed when it announces its policy decision in February, with a 9 percent chance of a 50 bp increase. — Reuters
