FOREX-Dollar trades near one-week lows after soft U.S. inflation

Reuters

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    * Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

    By Ritvik Carvalho
    LONDON, Sept 15  (Reuters) - The dollar traded near a
one-week low against peers on Wednesday after
softer-than-expected U.S. inflation figures tempered immediate
expectations about Federal Reserve tapering while disappointing
Chinese data weighed on the yuan and Aussie.
    The dollar index  =USD  stood at 92.536, about 0.2% lower on
the day from Tuesday, when it dropped following the inflation
data only to recover on haven demand as stocks slid on Wall
Street.
    The index has meandered between 92.3 and 92.9 over the past
week as several Fed officials have suggested the U.S. central
bank could reduce its buying of debt securities by the end of
the year, even after a much-weaker-than-expected payrolls report
at the start of the month.
    While elevated inflation has kept pressure on policymakers,
data overnight showed the U.S. consumer price index, excluding
the volatile food and energy components, edged up just 0.1% last
month.  urn:newsml:reuters.com:*:nL1N2QG130
    The Federal Open Market Committee (FOMC) holds its monetary
policy meeting next week, with investors keen to find out
whether a tapering announcement will be made.
    Tapering tends to benefit the dollar as it suggests the Fed
is one step closer toward tighter monetary policy. It also means
the central bank will be buying fewer debt assets, effectively
reducing the number of dollars in circulation.
    "The softer than expected U.S. CPI inflation data for August
released earlier this week has seemingly confirmed the market
expectation that the Fed would stick with its patient stance on
QE taper at the upcoming September policy meeting next week,"
said Valentin Marinov, head of G10 FX research at Credit
Agricole.
    Marinov added that next week the Fed could start preparing
the ground for a very cautious policy normalisation, potentially
as soon as November.
    "A number of Fed hawks have expressed the view that
notwithstanding the recent weakness in the U.S. labour market
and activity data and the signs that the inflation overshoot is
losing its intensity, a QE taper is warranted before yearend. If
confirmed, a more hawkish Fed message next week could put the
nascent risk recovery to the test and boost the high-yielding
safe-haven USD."     
    One euro bought $1.1821 on Wednesday, about 0.1% higher from
the previous session.
    European Central Bank Chief Economist Philip Lane speaks at
the IMFS webinar later in the day.
    The dollar slipped to a 4-week low of 109.22 yen  JPY=EBS .
    Meanwhile, the yuan  CNY=CFXS  and the Australian dollar
 AUD=D3  were knocked lower after Chinese data showed factory
and retail sales growth cooled more sharply than expected last
month.  L1N2QH08P  urn:newsml:reuters.com:*:nL1N2QH082 urn:newsml:reuters.com:*:nL4N2QH0XZ
    Adding to the broader China worries in financial markets was
a media report that embattled property developer China
Evergrande Group  3333.HK  won't be able to make interest
payments on its debt next week. urn:newsml:reuters.com:*:nFWN2QG0UF
    The yuan extended its decline for the day to as far as
6.4433 yuan per dollar before trading about 0.1% weaker at
6.4410, threatening to snap a five-day string of gains.
    The Aussie sank as low as $0.73015 for the first time in
more than two weeks following China's data, but recovered to be
little changed at $0.7320.

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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Ritvik Carvalho; Editing by Toby Chopra and Chizu
Nomiyama)
 ((Ritvik.Carvalho@thomsonreuters.com; +44 2075429406; Reuters
Messaging: ritvik.carvalho.thomsonreuters@reuters.net; Twitter
@ritvikcarvalho))

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