The dollar index climbed toward 103 on Wednesday, lifted by a sharp yen decline after the Bank of Japan defied market expectations for another policy adjustment by maintaining ultra-low interest rates and keeping its yield control policy unchanged. Meanwhile, the greenback remained close to its lowest levels in over seven months after data showed that US annual inflation slowed for a sixth straight month to 6.5% in December, in line with market forecasts. That was also the lowest reading since October 2021, raising hopes that inflation peaked at 9.1% in June. The data cemented expectations that the Fed will downshift to a smaller 25 basis point interest rate hike in February after delivering a half-percentage point increase in December. Investors now look ahead to US producer inflation and retail sales data due later on Wednesday that could provide more clues on the central bank’s policy tightening path.

News