February 3, 2023

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Dollar rises ahead of inflation data; Cryptos crumble from Reuters

©Reuters. FILE PHOTO: The US dollar banknote is seen in this July 17, 2022 illustration. REUTERS/Dado Ruvic/Illustration

By Rae Wee

SINGAPORE (Reuters) – The dollar regained its footing on Thursday ahead of key US inflation data due later in the day, while cryptocurrencies were fragile after the collapse of a bailout deal for exchange FTX by its larger rival Binance.

The greenback rose against its peers overnight and held on to those gains in early Asian trade, pushing the Japanese yen off a roughly two-week high in the previous session. The yen last bought 146.28 per dollar.

The euro hobbled just above parity at $1.0016, a little off its nearly two-month high set earlier in the week. Sterling was last seen at $1.1360 after falling 1.6% overnight.

Investors now have their eyes on the closely-watched US inflation figure due later Thursday, with a sharp rise in prices likely to add to the Federal Reserve’s aggressive monetary tightening campaign.

Economists polled by Reuters expect annual CPI inflation to land at 8% in October.

“Up until yesterday…the market looked like it was going to be positioned for lower than expected dates, which I thought was quite dangerous as five of the last six months have produced upside surprises,” said Ray Attrill, head of FX strategy at National Australia Bank (OTC:) (NAB).

“I think there’s every chance that if we see an upside surprise, we’ll see a prolonged correction in risky assets because the market would be forced to price the Fed either higher or higher for longer.”

The dollar has lost some momentum in recent weeks on hopes that the Fed could start scaling back its sharp rate hikes as early as December.

Against a basket of currencies, the was firm at 110.30 after rising nearly 0.8% overnight.

The risk-sensitive price was last up 0.05% to $0.6434, while the price rose 0.11% to $0.5890. Both were down over 1% overnight.

The greenback also received a boost from a crypto fallout that dampened risk sentiment and as US stocks fell overnight after results showed Republican gains in the mid-term elections looked more modest than some had anticipated.

In the latest turn of events in the crypto world, FTX Chief Executive Officer Sam Bankman-Fried told employees he was evaluating all options for his firm after a stunning bailout deal with rival exchange Binance collapsed on Wednesday.

Just a day earlier, crypto giant Binance had signed a non-binding agreement to buy FTX’s non-US entity to help cover a “liquidity crisis.”

“I think there’s been a bit of contagion from what’s going on in crypto to the broader markets… It seems to be having a worrying effect,” NAB’s Attrill said.

FTX’s native token, FTT, was last up 28.35% at $1.947, despite its month-to-date loss of more than 90%.

up 2% to $16,207 after falling to a two-year low of $15,632 in the previous session.