Investing.com - The dollar turned broadly higher against a basket of other major currencies on Tuesday, after upbeat U.S. consumer price inflation and new home sales data fuelled fresh optimism over the strength of the economy.
The dollar strengthened after data showed that U.S. consumer prices rose 0.2% in February, in line with market expectations, rebounding after a 0.7% decline in January.
Core inflation, which excludes food and energy costs ticked up 0.2% in February after a similar gain in January. Core inflation was up 1.7% from the same month last year, the largest increase since November.
The uptick in underlying inflation indicated that the Fed would still have leeway to tighten monetary policy even with inflation running below target.
A separate report showed that U.S. new home sales jumped 7.8% to an annual unit rate of 539,000 last month, the highest level since February 2008, the Commerce Department said.
In addition, the preliminary reading of the U.S. manufacturing purchasing managers' index rose to 55.3 this month, the highest level since October, from 55.1 in February.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.42% to 97.64.
EUR/USD slid 0.37% to 1.0904, pulling away from session highs of 1.1028.
The euro strengthened earlier, after research group Markit earlier said that its composite purchasing managers index, which measures activity in the manufacturing and services sectors, rose to 46-month high of 54.1 in March from 53.3 in February.
Germany’s private sector expanded at the fastest rate in eight months, but growth in France’s private sector eased this month.
The pound turned lower, with GBP/USD dropping 0.63% to 1.4861.
The U.K. Office for National Statistics earlier reported that the rate of consumer price inflation decelerated to 0.0% last month from 0.3% in January, compared to expectations for a 0.1% reading.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at rate of 1.2% last month, down from 1.4% in January and below forecasts for a reading of 1.3%.
Elsewhere, the dollar edged higher against the yen, with USD/JPY up 0.12% to 119.87 and remained lower against the Swiss franc, with USD/CHF retreating 0.83% to 0.9582.
The Australian and New Zealand dollars slipped lower, with AUD/USD easing 0.11% to 0.7870 and NZD/USD sliding 0.35% to 0.7625. Meanwhile, USD/CAD held steady at 1.2519.