The dollar was steady against a number of major currencies on Wednesday, March 13, as traders assessed what impact higher-than-expected inflation data could have on the chances of a U.S. interest rate cut at the Federal Reserve's June meeting.
The US consumer price index rose strongly in February, beating expectations in a sign that inflation is sustaining.
Although the consumer price index rose 0.4% in February, in line with expectations, the 3.2% year-on-year increase exceeded the expected 3.1% increase.
That has raised questions from analysts about whether the Fed will have enough data to proceed with more than two interest rate cuts this year.
According to the FedWatch tool, the market's expectation of interest rate cuts starting at the Fed's June meeting has fallen to about 67% from 71% earlier in the week.
The dollar index, which measures the performance of the US currency against a basket of six currencies, was little changed at 102.93.
Attention now turns to U.S. retail sales, a gauge of consumer spending that has been strong so far, and producer price data due later this week.
Yen and Wage Negotiations
Against the yen, the dollar was largely steady at 147.60 yen after the Japanese currency suffered its biggest drop in a month on Tuesday following Bank of Japan Governor Kazuo Ueda's slightly weak assessment of the country's economy.
Traders are awaiting preliminary estimates of the wage negotiations, which will be announced on Friday. The results will be crucial to the Bank of Japan’s decision on whether to abandon negative interest rates at its meeting on March 18-19.
Expectations are for big wage increases, with several of Japan's biggest companies already saying they have agreed to fully meet union demands.
The yen rose to 147.24 against the dollar as the wage news spread on Wednesday, before retreating in the afternoon in Asia.
The country's largest union has called for a 5.85% wage increase this year, above 5% for the first time in 30 years.
