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Dollar eases in Asia ahead of inflation data

The dollar dipped to 116.52 yen in Tokyo afternoon trade from 116.70 yen in New York Monday.

The euro climbed to 1.2735 dollars from 1.2711 dollars and was little changed at 148.34 from 148.36 yen in New York.

“The dollar’s fall was technical-driven in quiet trade after recent gains and the forex movement is limited,” said Tohru Sasaki, chief foreign exchange strategist at JP Morgan Chase in Tokyo.

The dollar rose rapidly after Friday’s sharp rebound in US retail sales.

Market participants were waiting for US inflation data out later Tuesday for hints on the outlook on the US interest rates. The Federal Reserve last week paused its two-year cycle of interest rate hikes amid signs of a US slowdown.

Wall Street economists predict headline producer price inflation will rise 0.3 percent in July and expect the core index to gain 0.2 percent, following respective gains of 0.5 and 0.2 percent in June.

The core reading excludes volatile energy and food prices.

On Wednesday, the United States will release its July consumer price index, which is also likely to impact on the dollar.

“The forex market will be affected by whether US economic indicators such as PPI and CPI will push forward or calm down expectations” that the Fed’s halt in rate hikes is only temporary, Sasaki said.

Etsuko Yamashita, senior currency analyst at Sumitomo Mitsui Banking Corp, said: “It all depends on the US inflation figures, whether or not the dollar can breach the 117-yen mark decisively this week.”

“The Fed’s reference in the statement last week on inflation—’some inflation risks remain’—should be interpreted as meaning that the US central bank will take a wait-see stance for some months ahead to see how serious it will be,” she said.

Sasaki said the yen was little moved by Japanese Prime Minister Junichiro Koizumi’s pilgrimage Tuesday to the controversial Yasukuni war shrine which angered Tokyo’s Asian neighbors.

Koizumi is due to step down next month after five years in office, during which political tension has risen with China but economic ties have grown closer.

“His visit to Yasukuni barely had an impact on the market,” Sasaki said.

“Although his visit might have some influence on the relationship between Japan and China and South Korea, its impact on economic relations will be limited. And the prime minister is to step down next month.”

The dollar was mixed against Asian currencies.

The dollar gained to 1.5806 Singapore dollars from 1.5789 on Monday, to 32.776 Taiwan dollars from 32.737 and to 51.417 Philippine pesos from 51.305.

The US currency fell to 9,093 Indonesian rupiah from 9094.5 and to 37.355 Thai baht from 37.425.