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Dollar Up, Boosted by Higher-than-Expected Consumer Prices and Rising Yields

ForexMay 12, 2021 11:20PM ET
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© Reuters.

By Gina Lee

Investing.com – The dollar was up on Thursday morning in Asia as rising U.S. Treasury yields and a bigger-than-expected rise in U.S. consumer prices accelerated fears about runaway inflation and lent support to the U.S. currency.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.04% to 90.718 by 11:09 PM ET (3:09 AM GMT).

The USD/JPY pair inched up 0.01% to 109.66, rising above the 109 mark and with the dollar close to its strongest level against the yen in five weeks.

The AUD/USD pair inched up 0.03% to 0.7728 and the NZD/USD pair edged up 0.20% to 0.7170.

The USD/CNY pair inched down 0.05% to 6.4535 while the GBP/USD pair inched up 0.09% to 1.4064.

The dollar also held onto its 0.6% gain against the euro from the previous session, trading at $1.2083 earlier in the Asian session. The greenback also climbed to 0.9083 against the Swiss franc, near a one-week high.

U.S inflation data released on Wednesday said that consumer prices rose to their highest level in 12 years, with the increasing demand as the economy continues to re-open pushing against supply constraints.

The Core Consumer Price Index (CPI) rose 0.9% month-on-month in April, higher than the 0.3% growth in forecasts prepared by Investing.com. The CPI rose 0.8% month-on-month and 4.2% year-on-year.

"The move in the dollar was fueled by the upward surprise in consumer prices, but also because the market was caught on the short side," Barclays (LON:BARC) foreign exchange strategist Shinichiro Kadota told Reuters.

The dollar could continue its upward trend as investors unwind their bearish bets on the currency. This would reposition it for a period of more sustained inflation as more and more countries continue their economic recovery from COVID-19.

"This market is aware of the potential for further upside surprises to inflation. This will support the dollar,” Barclay’s Kadota added.

Investors now await the producer price index and initial jobless claims data for April, both due later in the day. Further data on consumer prices, including retail sales, is due on Friday.

Meanwhile, benchmark 10-year U.S. Treasury yields rose to a five-week high of 1.7040% after an auction for the notes on Wednesday saw strong demand.

According to other investors, signs of a recovering labor market and increased consumer spending could lead to a buildup of inflationary pressure that could push yields and the dollar even higher.

Bitcoin continued a tumble triggered by a tweet from Tesla (NASDAQ:TSLA) Inc. CEO Elon Musk on the cryptocurrency front. The tweet said that Tesla has suspended the use of bitcoin to pay for vehicles over environmental concerns. It also added that Tesla will not be selling any bitcoin.

Dollar Up, Boosted by Higher-than-Expected Consumer Prices and Rising Yields
 

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Comments (1)
Aw wright
AndrewJW May 12, 2021 11:57PM ET
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Will the FED finally see sense or keep denying it sending the US into Hyperinflation. finally the light at the end of the tunnel seems to be that Traders don't believe Trumps FED anymore
 
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