By Gertrude Chavez-Dreyfus and Stefano Ribaudo

NEW YORK/MILAN (Reuters) – The U.S. dollar fell against the yen on Tuesday in a volatile session after Federal Reserve Governor Christopher Waller reiterated that raising interest rates is unlikely at this stage because inflation appears to be on track to meet the central bank's expectations. The bank's target is 2%.

Against other currencies, the US dollar was mostly flat ahead of the US Memorial Day holiday next week, including the end of the month, which usually stimulates a flurry of activity in the market.

In the absence of economic data this week, market participants have become more interested in comments from Federal Reserve officials.

“The latest data on the economy suggests that restrictive monetary policy is helping to cool aggregate demand, and April inflation data suggests that progress toward 2% has likely resumed,” Waller said in remarks prepared for delivery to the Peterson Institute for International Economics. .

“Central bankers should never say never, but the data suggests that inflation is not accelerating, and I think further interest rate increases are probably unnecessary.”

Fed Chair Jerome Powell, in his press conference after the Fed held interest rates steady earlier this month, also ruled out raising interest rates.

“What that does is it removes the risk scenario that the Fed is still considering raising interest rates because it actually questions its assumption that interest rates are constrained enough,” said Vishal Khandoha, co-head of broad markets fixed income at Morgan Stanley. Investment management.

“Chairman Powell and other members of the Fed have done a good job of making the rate hikes very clear. This in our mind is just market moving news versus the cuts being priced in.”

In late morning trading, the dollar fell 0.1 percent against the yen to 156.065 yen. This currency pair typically tracks expectations of interest rate movements: pricing cuts rather than rises affects the dollar because it reduces the yield on US debt assets such as Treasuries.

However, fears of interference by Japanese authorities prevented traders from pushing the yen to new lows. The yen fell to more than 160 yen to the dollar on April 29, its lowest level in 34 years.

Cryptocurrency gains

Atlanta Federal Reserve Bank President Raphael Bostic also spoke on Tuesday and warned against cutting interest rates too quickly. He said the Fed needs to be cautious about approving its first rate cut to make sure it doesn't hurt pent-up spending among businesses and households, and put the central bank in a position where inflation starts to “bounce back.”

Several officials on Monday also called for continued policy caution, even after data last week showed a decline in consumer price pressures in April.

“The Fed spokespeople are leading the market — and so far they haven't said anything that traders weren't expecting, which has kept the U.S. dollar steady,” said Helen Giffen, a foreign exchange trader at Monex USA in Washington.

“Barring a surprise from the FOMC minutes tomorrow afternoon, this week will likely remain fairly quiet.”

There was no significant change at 104.56.

The euro also settled at $1.0861.

U.S. interest rate futures on Tuesday were priced in at about 43 basis points of Fed rate cuts in 2024 — implying a 25 basis point cut and a more than 70% chance of a second move by December, according to LSEG's interest rate probability app.

In the euro zone, futures are betting on the European Central Bank cutting interest rates by 63 basis points in 2024 from around 73 basis points in mid-May.

Investors are also awaiting Thursday's data from the European Central Bank on negotiated wages and the Eurozone Purchasing Managers' Index which could provide further clues about the eurozone's monetary cycle.

In cryptocurrencies, Ethereum is expected to achieve its largest two-day gain in nearly two years, and Bitcoin is approaching a record high level amid speculation about the results of applications for US exchange-traded funds that will track the second largest cryptocurrency in the world.

Ethereum jumped 7.8% to $3,773 after hitting $3,833.70, its highest level since mid-March. It rose about 14% in the previous session, the largest daily percentage increase since November 2022.

It broke above the $70,000 level and was recently trading 1% higher at $70,241. It hit an all-time high of $73,803.25 in March.

On the data front, the focus will now be on the Personal Consumption Expenditures Price Index report – the Fed's preferred measure of inflation – due on May 31.

Against the Canadian dollar, the US currency rose 0.1% to 1.3643 Canadian dollars. Canada's annual inflation rate slowed to a three-year low of 2.7% in April, data showed, which was in line with estimates, and core measures continued to ease. These numbers raised bets on a Bank of Canada cut in June.

currency

tender

Prices in

May 21

03:21

PM GMT

Descripti RIC Latest US YTD Percentage, High Low Ratio

On closing the change bid

former

a class

Dollar 104.57 104.6 -0.02% 3.16% 104.76 104.

Index 47

EUR/dummy 1.0859 1.0857 0.02% -1.62% $1.0875 $1.0

p. 843

USD/JPY 156.08 156.18 -0.06% 10.66% 156.555 155.

N 855

EUR/JPY 1.0859 169.65 -0.09% 8.91% 169.93 169.

23

USD/Switzerland 0.9102 0.9108 -0.07% 8.15% 0.9117 0.90

Issue 88

GBP / 1.2721 1.2706 0.12% -0.02% $1.2727 1.0 $

Dollar 843

USD/CA 1.3642 1.3624 0.14% 2.92% 1.3675 1.36

Nadine 15

AUD/DO 0.667 0.6668 0.06% -2.15% $0.6679 $0.6

647

EUR/Switzerland 0.9882 0.9884 -0.02% 6.42% 0.9893 0.98

Q 73

EUR/STAR 0.8533 0.8543 -0.12% -1.56% 0.8551 0.85

Ling 34

NZD 0.6097 0.6106 -0.13% -3.5% 0.6111 USD 0.60

Dollar/88

LL

$/number 10.6648​ 10.6987 -0.32% 5.23% 10.7307 10.6

Route 415

EUR/Norway 11.581 11.6153 -0.3% 3.18% 11.6471 11.5

It is 526

USD/Switzerland 10.691 10.6884 0.02% 6.2% 10.7088 10.6

Aden 465

Euro/Sweden 11.61 11.5978 0.11% 4.36% 11.6235 11.5

In 715