Dollar Stability Amid Market Shifts

The U.S. dollar held steady despite fluctuating bond yields and market focus on Donald Trump’s presidential inauguration's inflationary potential. The yen increased against major currencies as the Japanese central bank hinted at a rate hike. Analysts evaluated improved U.S. consumer price data as still above Fed targets.

The U.S. dollar showed stability on Thursday, despite a decline in U.S. bond yields following recent inflation data. Attention is now directed towards Donald Trump's presidential inauguration and its potential to influence inflation, as markets adjust. Concurrently, the yen appreciated against the dollar and the euro, amid expectations of a Bank of Japan rate hike next week.

While U.S. inflation figures dipped month-on-month as forecasted, the annualized increase surpassed predictions, causing traders to react by buying stocks and reducing ten-year Treasury yields significantly. Currency responses remained more restrained. The U.S. dollar index increased marginally, as anticipation builds for Scott Bessent's Senate Finance Committee hearing for Treasury nomination.

Despite little direct impact on foreign exchange from the Gaza ceasefire deal, the Israeli shekel rose to a one-month high. Analysts noted that inflation data exceeded expectations but was still significantly above the Fed's targets, which affected Treasury yield projections. Yen gains persisted as the Bank of Japan hinted at potential currency interventions and policy shifts surrounding Trump's upcoming inauguration.

(With inputs from agencies.)