Dollar Up but Increasing Commodity – The dollar was up on Tuesday morning in Asia, but gains were capped by expectations that already-surging commodity prices will rise further.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.06% to 90.237 by 11:53 PM ET (3:53 AM GMT).

The USD/JPY pair inched up 0.10% to 108.89. Data released earlier in the day in Japan said that March’s household spending grew at a better-than-expected 7.2% month-on-month. Spending grew 6.2% year-on-year, the biggest gain since September 2019 and the first growth in four months.

The AUD/USD pair inched up 0.03% to 0.7833 ahead of Australia’s federal budget, due to be handed down later in the day. The NZD/USD pair edged down 0.14% to 0.7264.

The USD/CNY pair inched up 0.18% to 6.4270. China’s Consumer Price Index (CPI) just missed expectations, contracting 0.3% month-on-month but grew 0.9% year-on-year. The Producer Price Index (PPI) grew a better-than-expected 6.8% year-on-year.

The GBP/USD pair inched down 0.01% to 1.4118, passing the 1.4-mark.

Investors now await inflation data from the U.S., including core CPI, that will be released on Wednesday. The data will gauge the level of inflationary pressure and could push Treasury yields up, potentially giving the greenback a boost, according to some investors.

Treasuries and the dollar have alternated between gains and losses as investor expectations on when the U.S. Federal Reserve will start moving away from its current dovish policy vacillate.

A slew of Fed officials will also speak throughout the week, including Governor Lael Brainard later in the day. Across the Atlantic, Bank of England Governor Andrew Bailey will speak on Wednesday.

“Right now, the easiest reflation trade is to watch commodity prices and buy commodity currencies… the markets have doubts about the Fed’s benign view of inflation, but uncertainty about policy keeps some currency pairs in a tight range,” Daiwa Securities foreign exchange strategist Yukio Ishizuki told Reuters.

Against other currencies, the dollar was trading at C$1.2097 against its Canadian counterpart, the greenback’s weakest level in more than three years. It was also near a two-week low against the Mexican peso.

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Additionally, supply constraints for some commodities could mean inflated prices in the short term, giving commodity-linked currencies a further boost.

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In cryptocurrencies, ether traded at $3,906, slightly down from its recent record high of $4,200. Bitcoin also fell slightly to $55,578.

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Dollar Up But Gains Capped by B.1.1.7

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Dollar Up but Increasing Commodity