By Rae Wee
SINGAPORE, May 10 (Reuters) - The dollar weakened
broadly on Wednesday after U.S. President Joe Biden and top
lawmakers failed to break a deadlock on the debt ceiling crisis,
though currency moves were marginal amid caution ahead of U.S.
inflation data later in the day.
Biden and House of Representatives Speaker Kevin McCarthy
remained divided over raising the $31.4 trillion U.S. debt limit
following talks on Tuesday, with just weeks to go before the
United States may be forced into an unprecedented default.
The two, however, agreed to further talks and committed
their aides to daily. Biden, McCarthy and the three other top
congressional leaders are set to meet again on Friday.
The greenback dipped slightly in Asia trade, while holding
onto most of its gains from the previous session as nervousness
over Wednesday's U.S. inflation data kept the safe-haven
currency buoyant.
The euro rose 0.06% to $1.0966 while sterling slipped 0.04% to $1.2617.
The kiwi edged 0.08% higher to $0.6340.
"There has been a lot of attention lately on the debt
ceiling issues," said Carol Kong, a currency strategist at
Commonwealth Bank of Australia (CBA). "I don't think the issue
will be resolved anytime soon. Typically, in the past, the
issues usually get resolved very last minute.
"So that means there could be some more volatility in
markets ... and I think the dollar could weaken even further, as
we have seen in the past."
Against a basket of currencies, the U.S. dollar index steadied at 101.64.
Economists polled by Reuters expect core consumer prices in
the United States to rise 5.5% on a year-on-year basis for the
month of April.
A stronger-than-expected reading could prove a headache for
the Federal Reserve, which had just last week opened the door to
a pause in its aggressive tightening cycle, having delivered 10
consecutive rate hikes since March 2022.
"The bar is high for a Fed response to data surprises in
either direction," said Vishnu Varathan, head of economics and
strategy at Mizuho Bank.
"Having concluded 500 bps of rate hikes and anticipating
some credit tightening from a shake-down amongst regional banks,
the Fed is unlikely to tighten further on merely
'sticky' inflation, instead requiring re-acceleration of
inflation."
Money markets are pricing in a roughly 80% chance that the
Fed will keep rates on hold at its next meeting in June, and
expect rate cuts to begin in July through to the end of the
year. Rising expectations that the Fed will begin cutting rates
later this year have been driven by recent stress in the banking
sector following the collapse of Silicon Valley Bank in March.
Elsewhere, the Japanese yen fell 0.1% to 135.32
per dollar.
Bank of Japan (BOJ) Governor Kazuo Ueda said on Wednesday
the central bank will debate an exit strategy from ultra-loose
monetary policy and communicate it to the public once stable,
sustained achievement of its inflation target approaches.
"What Ueda said was not surprising at all," said CBA's Kong.
"I think markets are already expecting the Bank of Japan to make
some moves."
The Australian dollar was last 0.03% lower at
$0.6760.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Rae Wee; Editing by Edwina Gibbs & Simon
Cameron-Moore)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.