Sterling squeezed as focus turns to US inflation

SINGAPORE :Sterling crosses nursed losses on Thursday, while the yen found a footing in holiday-thinned trade ahead of the last major data release of the year in Friday's U.S. inflation figures.

Sterling suffered its sharpest drop on the dollar in two months on Wednesday after British inflation dived below forecasts to an annual 3.9 per cent in October, a two-year low.

The currency fell 0.7 per cent to $1.2638 as traders priced in Bank of England rate cuts as soon as May. Subsequent moves in Thursday's Asia session were modest and it last bought $1.2639.

Against the euro the pound hit its weakest in more than three weeks at 86.68 pence and it last traded near that level at 86.59. The Aussie hovered at £0.5334, after hitting a six-month top of £0.5355.

Analysts forecast a similar easing for Friday's U.S. core personal consumption expenditure (PCE) data, with the annual inflation rate seen slowing to its lowest since 2021 at 3.3 per cent.

But given the dollar has been on the back foot for weeks and 150 basis points of Federal Reserve cuts are already priced in for 2024, caution held off any further dollar selling, for now.

"Some adjustments in positions and paring back of risks ahead of (this) event...is only sensible," said OCBC currency strategist Christopher Wong in Singapore.

"Liquidity is getting thinner as we get closer to the festive season, thin liquidity can exacerbate price movements on any data surprises."

Heavy selling in the final hour of equities trade on Wall Street had also sent a ripple of risk-aversion through markets that hung over Asia trade, even as stock futures steadied.

The mood helped the safe-haven yen along with Japan lifting its growth projection for the fiscal year to 1.6 per cent.

The yen rose about 0.5 per cent and last traded at 142.86 per dollar. It has lost more than 8 per cent on the dollar this year as the Bank of Japan has steadfastly kept short-term rates negative, against 300 basis points of U.S. interest rate hikes.

The euro was stable at $1.0952.

The Australian and New Zealand dollars traded just below Wednesday's five-month highs. The Aussie was last at $0.6753, having touched its highest since July at $0.6779 a day earlier. The kiwi traded at $0.6251.

The dollar index, down 1 per cent for the year so far, was marginally softer at 102.29 in Asia. Ten-year Treasury yields had hit a seven-month low of 3.847 per cent overnight.

China's yuan> slipped as offshore yuan funding costs fell and China's blue-chip stock index hovered near 5-year lows. It was last at 7.1463 to the dollar.

Bitcoin leapt briefly above $44,000 on Wednesday and was steady at $43,598 on Thursday. In emerging markets Indonesia's rupiah was steady at 15,525 to the dollar ahead of a central bank policy decision.

========================================================

Currency bid prices at 0541 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.0951 $1.0943 +0.07 per cent +0.00 per cent +1.0954 +1.0937

Dollar/Yen

142.9500 143.6750 -0.51 per cent +0.00 per cent +143.5550 +142.8700

Euro/Yen

156.54 157.07 -0.34 per cent +0.00 per cent +157.1200 +156.3700

Dollar/Swiss

0.8617 0.8626 -0.06 per cent +0.00 per cent +0.8627 +0.8616

Sterling/Dollar

1.2646 1.2639 +0.00 per cent +0.00 per cent +1.2650 +1.2631

Dollar/Canadian

1.3352 1.3371 -0.13 per cent +0.00 per cent +1.3370 +1.3351

Aussie/Dollar

0.6751 0.6731 +0.33 per cent +0.00 per cent +0.6753 +0.6720

NZ

Dollar/Dollar 0.6250 0.6248 +0.05 per cent +0.00 per cent +0.6262 +0.6242

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ