Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Dollar rises moderately on jump in U.S. inflation

EconomyMay 12, 2021 04:11PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

By Kate Duguid

NEW YORK (Reuters) -The U.S. dollar was higher on Wednesday, though well within recent ranges, after inflation data showed a surge in consumer prices in April.

The dollar index, which measures the U.S. currency against a basket of rivals, was last up 0.61% on the day to 90.760. But the move on Wednesday was relatively muted despite the big jump in April inflation - up 4.2% year over year, the fastest rise since 2008.

Rising prices typically strengthen the dollar because the market believes the Federal Reserve will raise interest rates to quell inflation. But the reaction in the currency market was fairly contained because Fed Chair Jerome Powell has pledged to keep rates anchored while also allowing inflation to run higher for a period.

"It's not a huge move. The dollar has basically been weakening since May of last year, ever since the pandemic. The move today only puts us back to where we were a few weeks ago," said Randy Frederick, vice president of trading and derivatives, Schwab Center for Financial Research.

Still, interest rate expectations have been pulled forward slightly - the eurodollar is now fully pricing in a Fed hike between March and June of 2023. There is an 80% chance of a hike in December 2022.

The Labor Department report on Wednesday showed U.S. consumer prices increased more than expected as booming demand in the reopening economy pushed against supply constraints. The consumer price index jumped 0.8% last month versus the 0.2% forecast by economists polled by Reuters.

The Fed has argued that while inflation is rising, it is likely temporary and will dip again by the end of the year.

"A lot of this near-term inflation is the result of all sorts of strange anomalies that have been created by the pandemic," said Frederick.

Mazen Issa, senior foreign exchange strategist at TD Securities, said that in addition to base-year effects, which Issa believes will peak in May, "The surge in prices you see in the CPI report are also a reflection of reopening pressures. Those should be transitory in nature. The old adage of - one data point doesn't make a trend - applies here."

The rising dollar left the euro 0.60% weaker at $1.208. The single currency on Tuesday had hit a 2-1/2 month high. The Japanese yen was 0.87% weaker on the day at 109.58 and the British pound was down 0.60% to $1.406.

In the digital space, cryptocurrency ether (ETH=BTSP) was last down 2.72%, having backed off a record level of $4,380.64 set earlier in the day.

Dollar rises moderately on jump in U.S. inflation
 

Related Articles

Fed-fueled dollar rises as bears make for exits
Fed-fueled dollar rises as bears make for exits By Reuters - Jun 18, 2021 8

By Saqib Iqbal Ahmed and Julien Ponthus NEW YORK (Reuters) - The dollar extended its advance against a basket of currencies on Friday, building on the gains logged after the U.S....

Trust Dollar Rally for Now, But Bears Will Be Back
Trust Dollar Rally for Now, But Bears Will Be Back By Investing.com - Jun 18, 2021 2

By Yasin Ebrahim Investing.com – The dollar's sunny days are set to continue for quite a while, but the Fed's path will eventually turn murky again to bring the bears out of...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Vlad Lozovskiy
Vlad Lozovskiy May 12, 2021 9:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Oh please, it did not jump.  trend is still down
Llewellyn Kruger
Llewellyn Kruger May 12, 2021 9:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
400 points is a pretty significant jump. Its been jumping up and down the last few weeks now.
Kevin Avila
Kevin Avila May 12, 2021 2:52AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
...nOtHiNg Is InFlAtEd...
Aniebiet Akang
Aniebiet Akang May 12, 2021 2:34AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Dollar remaineth vulnerable in my near term telescope. It will only rise on good data and then fall again, till Fed tapes up economy
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email