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Dollar surges as sticky U.S. inflation dampens rate cut hopes

Asian stocks dipped on Thursday as hotter-than-expected U.S. inflation data forced investors to reassess their expectations for Federal Reserve interest rate cuts. The dollar surged, reaching a 34-year high against the Japanese yen on the …

Asian stocks dipped on Thursday as hotter-than-expected U.S. inflation data forced investors to reassess their expectations for Federal Reserve interest rate cuts. The dollar surged, reaching a 34-year high against the Japanese yen on the prospect of higher U.S. borrowing costs.

While Chinese stocks managed small gains, most of Asia followed Wall Street lower after data showed U.S. consumer prices rose more than anticipated in March. This dashed hopes of a rate cut by the Fed in June, with September now seen as a more likely start for easing. The total amount of easing expected this year also fell short of the Fed’s projections.

Despite the hawkish data, U.S. stock futures and Treasuries found some stability after their initial sell-off, suggesting investors still believe the Fed will intervene to support markets if necessary.

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The Bank of Canada left its interest rate unchanged but hinted at a possible cut in June if the recent cooling trend in inflation holds.

Meanwhile, the dollar strengthened significantly against major currencies. The yen tumbled close to a 34-year low, breaching the psychologically important level of 152 yen per dollar (USD/JPY). This sharp depreciation raises concerns about potential intervention by Japanese authorities. The warning was echoed by Masato Kanda, Japan’s top currency diplomat, who signalled they wouldn’t rule out taking action to address disorderly exchange rate movements


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