The dollar was broadly lower on Tuesday ahead of a keenly...

The dollar was broadly lower on Tuesday ahead of a keenly anticipated inflation report, while the yen strengthened as surprise pick Kazuo Ueda was nominated to be the next governor of Bank of Japan.

Markets are looking to the U.S. consumer price index (CPI) data for further clues on Federal Reserve's policy outlook, with the headline number expected to rise 0.5% in January, according to a Reuters poll, after falling 0.1% in December.

The dollar index =USD , which measures the U.S. currency against six major rivals, eased 0.107% to 103.09, having slipped 0.34% overnight.

The index is up 1% for the month of February but is far off the 20-year peak of 114.78 it touched in September when the Fed was in the midst of its jumbo rate hikes.

Since then the Fed has tempered its pace of rate hikes. The U.S. central bank earlier this month raised interest rates by 25 basis points but said that it was turning the corner in its fight against inflation.

Moh Siong Sim, a currency strategist at Bank of Singapore, said the foreign exchange market on Tuesday was in a holding pattern as the focus moves to the CPI data.

The debate right now is whether inflation will be stuck at 3 to 4% or move lower to 2% in line with the market's earlier hopes, Sim said.

"The odds are shifting to a more reasonable assessment that we might possibly get stuck at 3-4% and the Fed will have to do more."

The market is pricing U.S. interest rates to peak at around 5.2% in July and ending the year at 4.9%, moving away from earlier expectations for the start deeper rate cuts later this year. FEDWATCH

With Fed Chair Jerome Powell reiterating that disinflation was underway last week, investors will parse through Tuesday's report to gauge the direction of prices.

Kristina Clifton, a senior economist at Commonwealth Bank of Australia, said there are tentative signs of U.S. inflation cooling but said services inflation, which is strongly linked to wages growth, has shown no signs of softening.

"While the labour market remains tight and wages growth very strong, there is the risk that we receive upside surprises on the underlying inflation figures," she said.

The euro EUR=EBS was up 0.14% at $1.0735, having risen 0.435% the previous session. Sterling was last trading at $1.2147, up 0.10% on the day, after rising 0.68%.

The Australian dollar AUD=D3 added 0.10% to $0.697, while the kiwi NZD=D3 fell 0.06% to $0.635.

NEW BOJ GOV Japan's government named academic Kazuo Ueda as its pick to become the next central bank governor, with investors betting that the surprise choice could preclude an end to the unpopular yield control policy.

Ueda, a former BOJ policy board member and an academic at Kyoritsu Women's University, is considered an expert on monetary policy but had not even been seen as a dark horse candidate for the top job.

National Australia Bank's currency strategist Rodrigo Catril said Ueda is regarded as a sensible choice as he is not a fully committed "uber dove" and he should have more flexibility as an outsider.

The Japanese yen JPY=EBS strengthened 0.46% to 131.82 per dollar on Tuesday, having slipped 0.7% in the previous session.

The yen dropped sharply last year to a 32-year low of 151.94 per dollar as U.S. rates rose and Japanese rates stayed near zero, but it has since recouped those losses as the Fed looks to pause its tightening while speculation increase that the BOJ will move away from its ultra-loose policy.

Data on Tuesday showed Japan's economy averted recession but rebounded much less than expected in October-December as business investment slumped, meaning an exit from stimulus will prove a challenge for the BOJ.

"We believe that the modest recovery will continue this year, but today's data support the Bank of Japan’s argument that the recovery is still fragile and that easy monetary policy is needed," ING economists said in a note.

"The incoming new governor will find it difficult to start any normalization."

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	Currency bid prices at 0505 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.0739		$1.0725	 +0.12%		 +0.21%	  +1.0741	 +1.0725 
 Dollar/Yen		JPY=EBS	131.8050	   132.4250	-0.28%		 +0.63%	  +132.3550   +132.0100 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9178		 0.9197	  -0.16%		 -0.70%	  +0.9195	 +0.9180 
 Sterling/Dollar   GBP=D3	 1.2150		 1.2141	  +0.05%		 +0.45%	  +1.2151	 +1.2137 
 Dollar/Canadian   CAD=D3	 1.3333		 1.3333	  +0.00%		 -1.60%	  +1.3353	 +1.3330 
 Aussie/Dollar	 AUD=D3	 0.6971		 0.6966	  +0.07%		 +2.27%	  +0.6975	 +0.6950 
 NZ				NZD=D3	 0.6348		 0.6359	  -0.14%		 +0.01%	  +0.6367	 +0.6330 
 Dollar/Dollar																				   

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX

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World FX rates	https://tmsnrt.rs/2RBWI5E 

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