(Recasts, adds comment, updates prices)
BOJ keeps ultra-low rates; yen down vs dollar in choppy trade
U.S. retail sales fall in December
U.S. producer prices slide in December
Fed officials double down on higher peak fed funds rate
The dollar rose against major currencies on Wednesday in choppy trading, gaining safe-haven bids as risk appetite worsened with stocks on the defensive amid hawkish comments from U.S. Federal Reserve officials that suggested more interest rate increases are likely to tame inflation.
Analysts, however, remained convinced that the currency has already hit its peak and is in the midst of an overall downtrend.
"The dollar will continue to sputter due to the tamer outlook for both U.S. inflation and Fed policy," said Joe Manimbo, senior market analyst, at Convera in Washington.
"The dollar is likely to remain on a descending path as long as markets price in a material risk of U.S. rate cuts later this year."
The greenback earlier fell across board after a slate of weak economic data backed expectations that the Fed may be nearing a pause in its rate-hiking cycle.
The earlier sell-off in the dollar came after the Bank of Japan maintained ultra-low interest rates. The yen initially gained sharply, but recovered on expectations for tighter policy in the coming months.
Fed officials on Wednesday, however, dampened expectations that the U.S. central bank is nearing the end of its tightening policy.
Cleveland Fed President Loretta Mester
said the Fed needs to raise interest rates a "little bit" above the 5.00% to 5.25% range in order to bring inflation to heel.
St. Louis Fed President James Bullard , for his part, said the Fed should get the policy rate of interest above 5% "as quickly as we can" before pausing rate increases needed to battle an ongoing outbreak of inflation.
Their comments helped push U.S. stocks lower and extended a rally in Treasuries that weighed on yields.
In afternoon trading, the U.S. currency rose against the commodity-linked currencies such as the Australian, New Zealand, and Canadian dollars, which sensitive to risk appetite.
The Australian dollar AUD=D3 fell 0.7% to US$0.6936, after hitting its highest since August last year. The New Zealand dollar NZD=D3 traded flat on the day at US$0.6430. Earlier in the session, it rose to its highest level in a month.
Against the Canadian dollar, the buck rose 0.8% to C$1.3497 CAD=D3 .
The U.S. unit earlier dropped after data showed that U.S. retail sales fell more than expected in December, pulled down by declines in purchases of motor vehicles and a range of other goods. They fell 1.1% last month. Data for November was revised to show sales dropping 1.0% instead of 0.6% as previously reported.
A separate report from the Labor Department showed the producer price index for final demand decreased 0.5% in December after rising 0.2% in November. The PPI report followed data last week showing that monthly consumer prices fell for the first time in more than 2-1/2 years in December.
"The PPI and retail sales numbers show that there are disinflationary pressures going on," said Juan Perez, director of trading at Monex USA in Washington.
U.S. manufacturing output also fell 1.3% in December, more than expected, data showed. In Japan, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. It also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target.
Some analysts said the BOJ was likely to tighten policy soon and the currency walked back some of its losses.
The dollar rose as much as 2.7% to 131.58 yen before gains were pared. It was last up 0.6% at 128.825 yen JPY=EBS .
Sterling rose to a five-week high even as consumer price inflation fell to a three-month low as core CPI failed to moderate, remaining at 6.3%. The pound was last up 0.4% at $1.2336 GBP=D3 .
The euro EUR=EBS was little changed $1.0790. It earlier posted sharp gains after European Central Bank member Francois Villeroy de Galhau said it was too early to speculate about what the central bank would do at the March meeting. Media reports on Tuesday said the ECB could slow its pace of tightening further in March.
======================================================== Currency bid prices at 3:59PM (2059 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 102.4000 102.4000 +0.02% -1.053% +102.9000 +101.5100 Euro/Dollar EUR=EBS $1.0791 $1.0790 +0.00% +0.70% +$1.0888 +$1.0767 Dollar/Yen JPY=EBS 128.8550 128.1200 +0.58% -1.71% +131.5700 +127.5700 Euro/Yen EURJPY= 139.03 138.22 +0.59% -0.91% +141.6800 +138.2700 Dollar/Swiss CHF=EBS 0.9168 0.9218 -0.55% -0.85% +0.9245 +0.9086 Sterling/Dollar GBP=D3 $1.2339 $1.2287 +0.43% +2.03% +$1.2435 +$1.2254 Dollar/Canadian CAD=D3 1.3498 1.3391 +0.81% -0.37% +1.3500 +1.3351 Aussie/Dollar AUD=D3 $0.6937 $0.6986 -0.70% +1.77% +$0.7064 +$0.6936 Euro/Swiss EURCHF= 0.9891 0.9946 -0.55% -0.04% +0.9963 +0.9876 Euro/Sterling EURGBP= 0.8743 0.8778 -0.40% -1.14% +0.8804 +0.8735 NZ NZD=D3 $0.6430 $0.6430 +0.02% +1.28% +$0.6530 +$0.6424 Dollar/DollarDollar/Norway NOK=D3 9.9185 9.8795 +0.43% +1.10% +9.9370 +9.7805 Euro/Norway EURNOK= 10.7070 10.6436 +0.60% +2.03% +10.7250 +10.6031 Dollar/Sweden SEK= 10.3379 10.4167 -0.74% -0.67% +10.4549 +10.2408 Euro/Sweden EURSEK= 11.1495 11.2329 -0.74% +0.00% +11.2508 +11.1020 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5EJapan's yen and yields https://tmsnrt.rs/3iQF9S7 BOJ's yield curve defence https://tmsnrt.rs/3Xlbdws
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
