SINGAPORE HONG KONG Major currencies held steady on Wednesday, with traders cautious about placing large bets ahead of the U.S. inflation data, which markets will scrutinise for guidance on how steeply the U.S. Federal ReserveFederal Reserve will raise interest rates in the coming months.
The figures are due at 1230 GMT. The headline inflation in the year-on-year is expected to be running at a scorching 8.7 per cent, a small retreat from June's 9.1 per cent figure. Core inflation is expected to be 0.5 per cent month-on-month.
The dollar was relatively steady after a bit of a pause from a retreat that began in the middle of July.
It bought 135 Japanese yen and sat at $1.0215 per euro and $1.2089 versus sterling, all little changed on the day and largely unchanged since the start of the week.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said all eyes are on the U.S. CPI.
We don't expect the dollar to move out of its range despite the fact that the currency has been quiet this week, and we don't expect the dollar to move out of its range before the data. Traders expect a reaction to the core inflation figure.
The market will initially get more excited by a downside core CPI surprise than an upside surprise, according to Deutsche Bank strategist Alan Ruskin. If commodity prices fall, inflation can quickly recede, and that's what's going to happen.
He said that it will be a broad-based negative for the U.S. dollar, due to the market's recent proclivity to buy risk dips.
An upside core CPI surprise will fit with the pattern of the last three releases. He said that the dollar yen could rise to a range of 135 to 139 per dollar, the purist long dollar trade in this instance is versus the yen.
A quick reading on policymakers' reaction may come from Fed officials Charles Evans and Neel Kashkari, who are due to make speeches at 1500 GMT and 1800 GMT, though they will have another set of price data in August before September's policy meeting.
The kiwi traded at $0.6295.
On Wednesday, Chinese inflation data showed a small increase in annual consumer inflation to 2.7 per cent and a slowdown in factory-gate price growth. The yuan lost ground to 6.762 per dollar due to the still muted CPI figure, according to analysts at HSBC.
A drumbeat of fund wipeouts and thefts over the past few months rattled the virtual currency at $23,000 on Wednesday.