New York Forex Market: Dollar Resumes Decline After US CPI Release, Most G-10 Currencies Rise
The US dollar weakened on Friday after the overall US January CPI increase came in below expectations, prompting the dollar to fall for the fifth time in six days and US Treasury yields to decline.
The dollar traded in a narrow range against most G-10 currencies before and after the release of the US CPI data.
The Bloomberg Dollar Index rose as much as 0.25% before the data release, then fell by less than 0.1% afterward; it closed down 0.06% on Friday.
According to European traders, leveraged accounts took profits on short dollar positions before the data release and ahead of the long US weekend.
After the inflation data was released, US Treasuries rallied as investors increased bets on Federal Reserve rate cuts, expecting more than two cuts in 2026.
“In our view, the CPI report has a fairly neutral impact on the Fed’s outlook,” said Aroop Chatterjee, Managing Director at Wells Fargo Securities.
“We believe the market may be overestimating the likelihood of Fed rate cuts this year, which leaves room for dollar upside, especially against lower-yielding currencies in the G-10 and emerging markets.”
Against the backdrop of the weaker dollar, safe-haven currencies such as the yen and the Swiss franc posted the largest gains this week.
The Bloomberg Dollar Index fell 0.8% this week, its fourth decline in five weeks; CFTC data shows that speculators have increased their short dollar positions to the highest level since June.
The pound rose 0.3%, lagging behind other developed market currencies, as Prime Minister Keir Starmer’s political future faces uncertainty.
USD/JPY fell by less than 0.1% to 152.65, declining for the fifth consecutive trading day; Bank of Japan Policy Board member Naoki Tamura said that the final element to achieving the 2% inflation target is wage growth, which is expected to be confirmed around this spring.
EUR/USD closed essentially flat on Friday at 1.1874; European Central Bank Governing Council member Martins Kazaks said the ECB is still observing how much the euro’s rise starting in 2025 will impact the economy.
EUR/CHF fell 0.2% to 0.9116; Switzerland’s January inflation rate was slightly above zero, offering limited relief for the Swiss National Bank on the issue of whether to reintroduce negative interest rates.
EUR/GBP fell 0.2% to 0.8697.
Editor: Li Tong
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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