SINGAPORE, Dec 26 (Reuters) – The dollar was trying to find a floor on Tuesday in holiday-thinned trade, pressured by signs that inflation in the world’s largest economy is cooling that will likely give the Federal Reserve room to ease interest rates next year.<\/p>\n\n\n\n
The yen meanwhile steadied near its recent five-month peak on the prospect that the Bank of Japan (BOJ) could soon mark an end to its ultra-easy policy. For most of 2022 and 2023, the policy has kept the Japanese currency under pressure as other major central banks globally embarked on aggressive rate-hike cycles.<\/p>\n\n\n\n
Currency moves were largely muted in the day after Christmas, with markets in Australia, New Zealand and Hong Kong still out for the Boxing Day public holiday.<\/p>\n\n\n\n
Against the greenback, the euro slipped 0.06% to $1.1019, but was not too far from a more than four-month top of $1.1040 hit last week.<\/p>\n\n\n\n
Sterling was little changed at $1.2701, while the Australian and New Zealand dollars were huddled near their recent five-month peaks.<\/p>\n\n\n\n
The dollar index languished near a five-month low of 101.42 hit last week, and was last at 101.65.<\/p>\n\n\n\n
Data released on Friday showed U.S. prices<\/a> fell in November for the first in more than 3-1\/2 years, pushing the annual increase in inflation further below 3% and boosting market expectations of an interest rate cut from the Fed next March.<\/p>\n\n\n\n The reading came a week after Fed policymakers opened the door to rate cuts in 2024 at the central bank’s final\u00a0policy meeting<\/a>\u00a0for the year, a move that drove the dollar lower.<\/p>\n\n\n\n “The Fed has made considerable progress on inflation, as core started the year closer to an annual rate of 5%, though the job is not yet done in ensuring inflation is on a sustained trajectory toward its 2% target,” Wells Fargo analysts said in a note.<\/p>\n\n\n\n In Asia, the yen rose 0.1% to 142.20 per dollar, drawing additional support from comments by BOJ Governor Kazuo Ueda, who signalled the possibility of a policy shift.<\/p>\n\n\n\n Ueda said on Monday<\/a> the likelihood of achieving the central bank’s inflation target was “gradually rising” and it would consider changing policy if prospects of sustainably achieving the 2% target increase “sufficiently”, though he said the BOJ had not decided on a specific timing to change its ultra-loose monetary stance.<\/p>\n\n\n\n “BOJ Governor Ueda did not provide any policy guidance in his speech yesterday, though he was hopeful that Japan was finally getting out of the low-inflation environment,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.<\/p>\n\n\n\n A slew of data out on Tuesday showed Japan’s jobless rate<\/a> was unchanged at 2.5% in November from the previous month, while business-to-business<\/a> service inflation was steady at 2.3% last month.<\/p>\n\n\n\n Elsewhere, the kiwi gained 0.1% to $0.63145, while the Aussie last bought $0.68065.<\/p>\n\n\n\n