The dollar maintains a narrow range as investors expect U.S. inflation data

The dollar changed little against other major currencies on Tuesday as investors examined U.S. inflation data later in the session for clues as to when the Federal Reserve’s policy tightened.

The dollar index stood at 92.622, after retreating from a two-week high of 92.877 on Monday, while the euro changed hands at $ 1.18105, after recovering from the low of Monday, $ 1.17705, the lowest since Aug. 27.

An immediate focus is on U.S. consumer price data to be presented at 12:30 GMT.

Economists expect the core CPI, an index that eliminates volatile energy and food prices, to rise 0.3% in August from July. Its annual inflation falls slightly to 4.2%, from 4.3% in July.

Global consumer price inflation is expected to fall slightly to 5.3% from 5.4% in July.

“With the core CPI still seen above 4%, inflation is at a very abnormal level. Powell has said inflation will be transitory from March, but the Fed will likely have to adjust its wording in the next political statement, ”said Yukio Ishizuki, chief strategist at Daiwa Securities.

The Fed will hold the policy meeting next week. The Wall Street Journal reported Friday that Fed officials will seek a deal to begin comparing bond purchases in November.

“Reducing this year is an agreement made. The next question will be whether the Fed will raise interest rates next year. Given persistent inflation, the Fed may not be able to afford relaxation for too long,” Ishizuki said.

The yen relaxed slightly to 110,005 yen per dollar, but remained in its family territory for the past few weeks at around 110.

The limited movements of the currency pair saw traders lower their expectations of market changes.

Implicit volatilities in dollar / yen options have fallen to historic levels, with one-month volatility at 4.625%, the lowest since February last year just before the pandemic.

Risk-sensitive currencies have moved little so far, with the pound sterling at $ 1.3836 and the Australian dollar at $ 0.7362.

While global stock markets stood near record highs, supporting risk sentiment, some analysts warn of rising winds against risk sentiment.

“The appetite for global risk is approaching a more tenuous and contracted phase. A discordant G2 is increasingly the problem,” said Alan Ruskin, macro strategist at Deutsche Bank in New York.

“The US-China trade dispute has not found a solution. On the contrary, market forces dominate the quantitative targets and the expansion of bilateral balances will once again be a source of tension,” he added.

Many investors were also on the lookout for developments in China, where real estate developer Evergrande, who had no cash, struggled to solve solvency problems, while a relentless wave of regulatory moves from Beijing affected large technology companies.

In the crypto market, Bitcoin fell to $ 43,400, the lowest in almost a week and last stood at $ 44,973, while ether also fell to $ 3,283.