Dollar swings on Fed comments; Yuan stable post-inflation data

US Dollar remains range bound: The US Dollar remained range-bound on Thursday as traders processed less dovish comments from policymakers and awaited fresh economic data from the United States. 

Attention also focussed on China's inflation figures amid concerns about deflation in the world's second-largest economy.

Overnight, various Federal Reserve officials provided insights into their stance, expressing little urgency to start easing policy soon or to move rapidly once they do. Boston Fed President Susan Collins mentioned a cautious approach, suggesting it would be appropriate to begin easing policy restraint later this year.

Market expectations reflected an 18.5 per cent chance of a Fed rate cut in March, down notably from the beginning of the year, with traders foreseeing a nearly 60 per cent likelihood of a 25 basis point cut in May, according to CME Group's FedWatch Tool.

The Dollar, having briefly surpassed its 100-day moving average earlier in the week, saw slight declines overnight but hovered around 104.00 against a basket of major currencies.

Tony Sycamore, market analyst at IG, noted that given recent market adjustments, the Dollar's position around 104 seems appropriate. 

He suggested that the Dollar would need fresh impetus to test resistance levels around 104.60 and 104.80, with the release of the Consumer Price Index for January on Feb. 13 being the likely first opportunity.

In Asia, China reported a continued decline in consumer prices for a fourth consecutive month in January, along with a drop in producer prices, highlighting deflationary risks amid challenges in the country's economic recovery.

The consumer price index (CPI) fell 0.8 per cent year-on-year in January but rose 0.3 per cent month-on-month, contrary to economist forecasts. 

The producer price index (PPI) declined 2.5 per cent year-on-year in January, slightly better than anticipated.

Currency strategists, including Wei Liang Chang from DBS, expect Chinese authorities to prioritise stability in the yuan ahead of the Lunar New Year holidays, with the Dollar/onshore yuan likely to remain within a specified range for the time being.

The offshore Chinese yuan traded near $7.206 against the Dollar, while bitcoin saw a modest increase of 0.94 per cent to $44,602.23 in the cryptocurrency market.

(With Reuters Inputs)