Dollar holds firm amid uncertain US inflation data assessment

Dollar remains stable: The US Dollar remained stable against major currencies on Friday as investors assessed the mixed signals from the US consumer price inflation report and speculated on the possibility of Federal Reserve rate cuts starting in March.

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In December, US consumer prices rose by 0.3 per cent, driven by an ongoing increase in rents, exceeding economists' expectations of a 0.2 per cent gain. 

The annual rise of 3.4 per cent also surpassed the forecasted 3.2 per cent. Despite this, traders are pricing in a 73.2 per cent chance of a 25 basis point cut by the Fed in March, with further cuts anticipated, according to CME Group's FedWatch Tool.

Matt Simpson, Senior Market Analyst at City Index, noted the disparity between market expectations, data, and the Fed's narrative, stressing that the US Dollar did not exhibit signs of concern among USD bears.

The Dollar Index stood at 102.25, slightly lower than Thursday's high but well above the five-month low recorded in December. 

Federal Reserve officials, including Chicago Fed Bank President Austan Goolsbee and Cleveland Fed President Loretta Mester, expressed caution about prematurely cutting rates based on the latest CPI figures.

The Euro held steady around $1.0977, while sterling edged up to $1.2776. 

The Japanese Yen, supported by lower US Treasury yields, hovered around 145.11 per Dollar. The offshore Yuan remained stable at 7.170, despite concerns about the Chinese economy.

In Asia, the Taiwan Dollar showed little movement ahead of Saturday's crucial presidential and parliamentary elections. 

In the cryptocurrency market, bitcoin, after reaching a two-year high following the US Securities and Exchange Commission's approval of bitcoin-linked ETFs, stood at $46,118.00, while ether declined by 0.27 per cent to $2,596.50.

(With Reuters Inputs)