Key points

  • The US dollar held firm in Tuesday's Asia session while traders awaited key US inflation data, according to Business Recorder.
  • The Australian and New Zealand dollars made gains while oil prices tumbled, Business Recorder reported.
  • Markets are currently pricing an 85% chance of a Federal Reserve rate increase next month following a strong October jobs report, according to Business Recorder.

The US dollar found support and maintained stability during Tuesday's Asia session, as market participants paused to await crucial US inflation figures that could bolster expectations for further interest rate hikes, according to Business Recorder. This comes on the heels of a volatile period involving a tumble in oil prices and overnight gains for stocks that had previously knocked the dollar lower as investors rotated into riskier assets.

Key Details

According to a Business Recorder report, the trade-sensitive Australian dollar rose by nearly 1% through Monday to sit at $0.6921 early Tuesday, while the New Zealand dollar climbed further to trade at $0.5624. The euro jumped 0.7% overnight to $1.1220, reversing a Friday fall that had been triggered by strong US jobs data which initially lifted the dollar and interest rate expectations. Analysts polled by Reuters noted that October headline inflation is seen picking up to 3.9% and core inflation to 2.8% year-on-year. Furthermore, a blowout October jobs report showed hiring at more than twice forecasts, leading markets to price an 85% chance of a Federal Reserve rate increase next month, as reported by Business Recorder.

Context and Impact

Early expectations for US interest rate cuts quickly turned into bets on hikes after conflict in the region drove up energy prices and fuelled inflation, according to Business Recorder. Market sentiment remains long dollars, with the dollar index having gained throughout the year driven by shifting interest rate projections and economic data releases.

Summary and What Next

Anything hotter than anticipated in the upcoming US consumer price index figures will likely add to rate hike expectations and potentially lift the dollar further, analysts told Business Recorder. The exact market reaction remains dependent on the official inflation numbers yet to be released.