(Bloomberg) — The dollar rose for a fourth day and Asian stocks fell faster than key inflation data that could further undermine confidence in the pace of Federal Reserve rate cuts.
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Stock benchmarks in Tokyo and Sydney retreated after the S&P 500 fell after its biggest five-day rise in a year. The Bloomberg Dollar Spot Index continued its post-election rally as the yen neared the closely watched 155 level.
10-year government bond yields were little changed after rising 12 basis points on Tuesday, while the Australian equivalent rose nine basis points in early trade on Wednesday. Traders are now pricing in about two US rate cuts through June, down from nearly four at the start of last week.
Investors are anticipating U.S. data due Wednesday, which is expected to show the headline consumer price index likely rose 0.2% for a fourth month, while the year-on-year measure is expected to accelerate for the first time since March . Moreover, market watchers expect US President Donald Trump’s proposed tax and tariff policies to further drive up inflation, with his top picks for government posts signaling a tough stance on China.
Stocks in Asia opened lower “given the compounding effects of higher rates, a stronger dollar and persistent trading uncertainties,” said Kyle Rodda, senior market analyst at Capital.Com Inc. “There is a greater risk that inflation will become a much bigger driving force. again from the markets, while the proverbial genie is not yet in the bottle.”
Chinese stocks fell on Tuesday after reports that Trump was close to choosing two men with track records of harshly criticizing China for key posts in his administration. That comes on top of global concerns about the potential economic impact of his campaign promises of tariffs on U.S. imports, tax cuts and migrant deportations.
Traders are betting on further losses in government bonds, anticipating that Trump’s planned policies will reignite inflation and keep US interest rates high. Open interest, an indication of futures traders’ positioning in the bond market, rose for the fourth straight session in the two-year bond contract, data released Tuesday showed.
Fed Minneapolis President Neel Kashkari said Tuesday he will closely monitor inflation data to determine whether another rate cut is appropriate at the U.S. central bank’s December meeting.
