VINACHEM

The dollar held mostly steady against other major currencies on Wednesday as traders awaited U.S. inflation data, though remarks from Federal Reserve Chair Jerome Powell a day earlier lifted U.S. yields and lent some support against the yen.

The dollar rose 0.7% to 153.53 yen , breaking above its 200-day moving average, but elsewhere it was steady, trading at $1.0358 per euro.

Powell, in testimony on Capitol Hill on Tuesday, stuck to a view there was no hurry to lower interest rates, which pushed 10-year Treasury yields up about 4 basis points.

"The yen is always quite sensitive to dollar yields," said Nick Twidale, chief market analyst at ATFX Global in Sydney, noting that a break of the 200-day moving average may have exaggerated the yen's dip in thin trade before U.S. CPI data.

Rabobank senior FX strategist Jane Foley said the yen was also likely subject to profit taking, being the best performing major currency against the dollar so far in 2025.

U.S. CPI will be published at 1330 GMT and economists polled by Reuters expect core consumer inflation to increase slightly to 0.3% for January.

"I think the CPI report today is probably going to be more telling for the market than Powell's testimony," Rabobank's Foley said.

"The CPI report will perhaps add a little more flavour with respect to the chances of the Fed accelerating or decelerating its rate cutting projections."

Money market traders have scaled back bets on Fed rate cuts this year and are now only fully pricing in one quarter-point cut, with around a 40% chance of a second.

Speculators in the currency market are long dollars and some may be nervous that a softer reading could stoke expectations for rate cuts and force an unwind of wagers on a higher dollar.

Data last week showed net U.S. dollar long positions against other G10 currencies stood around $31.5 billion, although that was down slightly from the prior week.

Sterling , which rose about 0.7% on Tuesday, hovered at $1.2449. The Australian dollar slipped to $0.6285.

TARIFFS

The European Union, Mexico and Canada have condemned U.S. President Donald Trump's decision to impose 25% tariffs on steel and aluminium imports and European Commission head Ursula von der Leyen said there would be countermeasures.

Investors have assumed U.S. tariffs would be positive for the dollar, by reshaping trade flows and encouraging other countries to weaken their currencies to offset the taxes.

However, analysts say inflation implications are less clear cut and that it is hard to say where the chips will fall as tariffs and retaliatory actions take effect, leaving investors bullish on the dollar inclined to trim their positions a bit.

The tariff-hit Canadian dollar was near its strongest levels for the year so far although slightly softer on the day at C$1.4298 per dollar, even as a White House official said steel tariffs would stack on top of a threatened blanket 25% levy on Mexico and Canada.

The Mexican peso and other emerging market currencies remain under pressure and near to deep recent lows.  – Source: Reuters