Dollar choppy with inflation data on deck

NEW YORK, May 10 (Reuters) – The dollar was choppy on Tuesday, fluctuating between modest gains and declines as it held near a two-decade high ahead of a key reading on inflation that could provide insight on the path of Federal Reserve monetary policy .

Investors were in a risk-on mood, as the yield on the benchmark US 10-year note dipped back below the 3% level and from a high of 3.203% on Monday, and the S&P 500 (.SPX) attempted to rebound after a three-day route.

Investors will closely eye the April consumer price index reading on Wednesday for any signs of inflation may be starting to cool, with expectations calling for an 8.1% annual increase compared to the 8.5% rise recorded in March. read more

“It’s the calm before inflation data tomorrow, so this is allowing a breather for risky assets,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC.

“Nothing has materially improved when it comes to global growth, worries about China so the market is just seeing there is an occasion before the inflation data tomorrow and there is a little bit of positioning going on and that is working in the favor of risk assets .”

The dollar index rose 0.087% at 103.780, with the euro down 0.12% to $1.0542.

The greenback has climbed nearly 9% this year as investors have gravitated towards the safe haven on concerns about the Fed’s ability to tamp down inflation without causing a recession, and on worries about slowing growth arising from the war in Ukraine and rising COVID-19 cases in China.

After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank’s June meeting, according to CME’s FedWatch Tool.

Multiple Fed officials on Tuesday echoed the need for a 50 basis point hike at the next meeting. Cleveland Federal Reserve Bank President Loretta Mester on Tuesday said raising interest rates in half-point increments “makes perfect sense” for the next couple of Fed meetings. read more

In addition, New York Fed President John Williams said that Chair Jerome Powell’s indication the central bank will hike by half a percentage point at the next two polict meetings is sensible. read more

The Japanese yen strengthened 0.07% versus the greenback at 130.17 per dollar, while Sterling was last trading at $1.2314, down 0.14% on the day.

In cryptocurrencies, Bitcoin last rose 0.29% to $31,029.07 after falling below the $30,000 mark for the first time since July.

Ethereum , last rose 2.88% to $2,356.96.

Reporting by Chuck Mikolajczak, Editing by William Maclean

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