On Wednesday, the dollar strengthened against the yen but faced a dip against the euro as investors awaited U.S. inflation data, seeking insights into the Federal Reserve’s potential interest rate cuts.
In the cryptocurrency market, bitcoin exhibited volatility after the Securities and Exchange Commission (SEC) officially approved 11 spot bitcoin exchange-traded funds (ETFs). However, confusion arose initially when an unauthorized social media message claimed the approval, leading to uncertainty. The SEC later confirmed the approval, including applications from major entities such as BlackRock, Ark Investments, 21Shares, Fidelity, Invesco, and VanEck. Some of these ETFs are expected to commence trading as early as Thursday. Bitcoin was last down 1.5% at $45,441.
The dollar index maintained a tight range, influenced by last Friday’s volatility following strong job gains data in December and subsequent soft details in the employment report. Further weakening occurred after an Institute for Supply Management (ISM) report indicated a considerable slowdown in the U.S. services sector in December.
Marc Chandler, Chief Market Strategist at Bannockburn Forex, noted the predictable consolidation this week following the earlier gyrations. The next potential driver for the dollar’s direction is the Consumer Price Index (CPI) report on Thursday, expected to reveal a 0.2% rise in monthly headline inflation and a 3.2% increase annually.
Traders are pricing in the likelihood of the Fed cutting rates in March as inflation approaches the central bank’s 2% target. Despite aggressive rate cut expectations, the dollar is holding above five-month lows reached in late December. The dollar index was last down 0.14% at 102.36, while the euro gained 0.36% to $1.09700. The dollar rose 0.84% against the yen, reaching 145.68.
In Japan, soft economic data may reduce the likelihood of the Bank of Japan raising rates out of negative territory this month. Japanese workers’ real wages continued to shrink for the 20th consecutive month in November.
In the cryptocurrency space, bitcoin experienced a 0.64% increase to $46,438, reaching a 21-month high of $47,897 on Tuesday after the SEC’s official approval. Ethereum also surged to $2,483, the highest since May 2022, ending the day up 5.19% at $2,468. Analysts noted that the SEC’s green light for ETFs, though anticipated, had already been fully priced into the market.
