Tom Westbrook

SYDNEY – Although the dollar began the week in a solid fashion on Monday, Friday’s peak was well below. This is because currency traders are trying to find a balance between volatile projections of interest rates and central bankers promising to maintain low inflation while keeping rates low.

On Wednesday, figures are due to reveal that consumer prices in America rose at 5.8% annually. It will also be the Federal Reserve’s next test.

The dollar rose marginally against the Japanese yen in early Asia trade. It fell from its one-week low to 113.49yen.

Following Friday’s strong U.S. Labour data, which briefly touched a $15.15135 euro peak of 15 months ago, the greenback settled back at $1.1566 euro.

Sterling was hammered last Friday when the Bank of England shocked traders by keeping rates stable. On Monday, it bounced back to $1.3487.

Surprisingly, the Bank of England reversed its aggressive betting on possible rate increases in Britain and around the world late last week. Bond markets have been a maelstrom of activity so stocks are soaring higher.

Jason Wong from Bank of New Zealand, Wellington, stated that central banks “have distorted many markets, pumping-up the equity market, and pumping down the bond market.”

He said that currencies are “sort of in the middle” of the chaos, asking what’s the heck is going on. The market appears to be in a holding mode, but there are risks, particularly in China, where slowing economies have global consequences.

New Zealand and Australia were both risk-sensitive currencies and made little progress in early trade. [AUD/]

Kim Mundy of Commonwealth Bank of Australia, an analyst (OTC) said that the risks are still skewed toward the downside. This is especially true if U.S. data about inflation is strong and if Australian data regarding employment on Thursday are particularly weak.

She stated that a dip to $0.7300 was possible.

Other data from the weekend showed unexpectedly high Chinese exports, but low imports. This is a sign of weak demand.

On Monday, The Communist Party meets and is likely to adopt a resolution in support of President Xi Jinping.

Traders also look forward to Chinese consumer and producer price data on Wednesday. With annual producer price growth expected to rise to 12%, this could be a sign of increased price pressure from global supply chains.

In early trade, the dollar was 6.3951 less than it had been in previous trading. At 94.225 the currency was unchanged, which places it at about the top of its range that it traded in for just over a month.

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Prices for currency bids at 0013 GMT

Description: RIC U.S. Last Close Pct. Change YTD High Bid Low

Prior Change

Session

Euro/Dollar

$1.1566 $1.1567 +0.00%-5.34%+1.1570 +1.1555

Dollar/Yen

113.5400 113.3750 +0.00%+9.76% +113.5600 +0.0000

Euro/Yen

131.332 131.16 +0.12% +3.47%+131.3400+131.0800

Dollar/Swiss

0.9122 0.9121 +0.00%+3.09% +0.9123+0.9121

Sterling/Dollar

1.3488 1.3488 +0.00%.-1.27%.+1.3491.+1.3482

Dollar/Canadian

1.2455 1.2460 +0.06% –2.21%

Aussie/Dollar

0.7392.0.7401. -0.12%.-3.91%. +0.7402 +10.7392

NZ

Dollar/Dollar 0.7105 0.7120 -0.20% -1.04% +0.7115 +0.7101

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