Dollar at one-month high as rate cut bets soften; yuan climbs after China data By Reuters

By Brigid Riley

TOKYO (Reuters) -The hovered at a one-month high against a basket of currencies on Wednesday as remarks by Federal Reserve Governor Christopher Waller dampened expectations for a March rate cut.

Meanwhile, China’s inched up after data showed the world’s second largest economy grew enough in the fourth quarter in 2023 to meet the country’s annual growth target.

In Fed news, Waller said that while the U.S. is “within striking distance” of the Fed’s 2% inflation goal, the central bank should not rush towards cuts in its benchmark interest rate until it is clear lower inflation will be sustained.

Market expectations of a rate cut in March have eased to a 62.2% chance versus an 76.9% view in the prior session, according to CME’s FedWatch Tool.

While the market’s latest pricing brings the Fed rate curve into more sensible territory, “with 157 basis points of rate cuts still priced in for 2024, there is room for this to ease back,” said Tony Sycamore, market analyst at IG.

Remarks by European Central Bank (ECB) President Christine Lagarde later on Wednesday could bring further repricing, he added.

“Rate cuts are coming but not as soon as some might be hoping for,” Sycamore said.

index, a measure of the greenback against a basket of major currencies, last stood at 103.32 after climbing as high as 103.42 during the previous session, its highest level since Dec. 13. Tuesday also saw the dollar’s biggest one-day percentage gain since Jan. 2.

In China, official data showed the economy grew 5.2% in the fourth quarter from a year earlier, slightly missing analysts’ expectations but still making it possible for Beijing to meet its annual growth target despite a shaky start to the year.

The offshore ticked up slightly to 7.2092 per dollar immediately after the data release.

The Australian dollar, often used as a liquid proxy for the yuan, was mostly flat at $0.65825, while the was up 0.1% at $0.6144.

Meanwhile, the euro was hanging near a one-month low at $1.08765 after its steepest one-day percentage drop in two weeks, following comments from several ECB policymakers this week that maintained uncertainty over the timing of rate cuts.

was last trading largely unchanged at $1.2641, after a sharp fall on Tuesday in the wake of data that showed British wage growth slowed in the three months through November.

The yen was under some pressure again as U.S. bond yields ticked up to support the greenback. The Japanese currency stood at 147.21 per dollar, just off its lowest since Dec. 6 at 147.49 hit earlier in the session.

The move in dollar/yen overnight was a “reminder that US Treasury yields remain a big influence on JPY with the (Bank of Japan) likely on the sidelines until at least March (and in our view more likely until mid year),” Rodrigo Catril, senior currency strategist at National Australia Bank, wrote in a note.

In cryptocurrencies, bitcoin was down 0.96% to $43,013.00.