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SINGAPORE (Reuters) – The dollar drifted lower in Asia on Thursday as traders waited on U.S. inflation data to see whether bets on as many as five Fed interest rate cuts this year were justified, while weak wages data dragged the yen to a six-week low on the euro.

Bitcoin traded at $46,400, just short of a two-year high, with investors welcoming the much-anticipated U.S. approval of spot bitcoin exchange-traded funds.

The approval opens the way for institutional buying and had been priced in over recent months, driving the cryptocurrency up 70% since mid-October.

The Australian and New Zealand dollars were each about 0.3% higher at $0.6721 and $0.6294, respectively, with moves capped ahead of the U.S. data at 1330 GMT. [AUD/]

The euro rose 0.1% to $1.0979 and sterling rose 0.2% to $1.2767.

The dollar index fell 0.1% to 102.23.

The dollar slid through the latter months of 2023 as the Federal Reserve indicated it was finished with rate hikes and traders priced in steep cuts. [MKTS/GLOB]

While that pricing has moderated slightly, and the dollar recovered, futures still show the market expects 140 basis points (bps) of cuts this year with a two-thirds chance they will begin as soon as March, leaving prices sensitive to data surprises.

“In our view investors are still too optimistically positioned for Fed rate cuts,” said Rabobank senior FX strategist Jane Foley in a note to clients.

“We expect further correction in this outlook and consequently expect the dollar to see some support on a 1-to-3-month view,” she said, with the euro to fall as far as $1.05 on a three-month view as Germany’s economy falters.

U.S. core inflation is seen at 0.3% for the month and 3.8% year-on-year for December, its slowest since early 2021.

A 0.3% reading, Deutsche Bank’s Alan Ruskin points out, would “suggest some stalling out in the downward improvements” and decrease the urgency of cutting interest rates.

After gaining sharply on Wednesday the dollar fell 0.3% to 145.39 yen, though the Japanese currency struck a six-month trough of 159.99 per euro in early trade.

Data on Wednesday showed Japanese workers’ real wages shrank for a 20th straight month in November – confounding officials’ wishes to see wage gains before tightening policy.

The softer dollar helped China’s yuan off a one-month trough to 7.1621 per dollar. [CNY/]

South Korea’s central bank kept its policy rate unchanged for an eighth consecutive meeting, as expected, leaving the won marginally stronger at 1,315.8 per dollar.

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Currency bid prices at 0500 GMT

Description RIC Last U.S. Close Previous Session Pct Change YTD Pct Change High Bid Low Bid

Euro/Dollar $1.0972 +0.05% -0.55% +1.0985

$1.0978 +1.0970

Dollar/Yen 145.7250 -0.25% +0.00% +145.8000

145.3800 +145.3300

Euro/Yen 159.93 -0.21% +0.00% +160.0000

159.60 +159.5200

Dollar/Swiss 0.8509 -0.15% +0.00% +0.8507

0.8495 +0.8492

Sterling/Dollar 1.2742 +0.20% +0.33% +1.2770

1.2764 +1.2741

Dollar/Canadian 1.3380 -0.11% +0.00% +1.3380

1.3364 +1.3358

Aussie/Dollar 0.6700 +0.29% -1.44% +0.6725

0.6719 +0.6698

NZ Dollar/Dollar 0.6227 +0.39% -1.08% +0.6252

0.6248 +0.6225

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(This story has been corrected to change the U.S. monthly CPI forecast to 0.3%, from 0.2%, in paragraph 11)