The dollar fell to a seven-month low against major peers on Monday while the yen spiked to an over seven-month peak as traders ramped up bets that the Bank of Japan may make further tweaks to its yield control policy at its meeting this week.
The Aussie breached the key $0.7000 level for the first time since August, and last rose 0.54% to $0.7013, after rising as high as $0.7019 earlier in the session.Against a basket of currencies, the U.S. dollar index slumped 0.46% to a seven-month trough at 101.
"The confirmation of a deceleration in price pressures is building up hopes that CPI could fall further in coming months," said analysts at OCBC. "An entrenched disinflation trend can reinforce expectations that the Fed could again scale back on its pace of hike beyond the February FOMC or even position for an earlier pause or dovish pivot."Markets are now pricing in a 91% chance of a 25 basis point increase by the Fed when it announces its policy decision in February, with a 9% chance of a 50 bp increase.
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