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Dollar Weakens After Inflation Data Calms Tapering Fears

ForexApr 14, 2021 02:50AM ET
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© Reuters.

By Peter Nurse

Investing.com - The dollar weakened in early European trading Wednesday, pushed down to three-week lows by falling bond yields after the rise in U.S. inflation in March wasn’t deemed sufficient to change Federal Reserve thinking. 

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 91.683, falling to its lowest level since March 22.

USD/JPY fell 0.2% at 108.83, touching its lowest level in three weeks, EUR/USD climbed 0.2% to 1.1967, hitting its highest level since mid-March, GBP/USD rose 0.3% to 1.3791, while the risk-sensitive AUD/USD rose 0.5% to 0.7676.

The U.S. consumer price index jumped 0.6% in March versus the previous month, the largest gain since August 2012, and rose 2.6% from a year earlier, both 0.1 percentage points above market expectations.

While these figures were above consensus expectations, there were some in the market that expected a sharper rise in inflation given the extent of pent up demand on the back of hefty fiscal stimulus and a successful vaccination program.

The yield on the benchmark 10-year U.S. Treasury note dipped to 1.620%, a far cry from the 1.78% level seen at the end of March.

Federal Reserve officials have repeatedly stated that the central bank will treat any near-term price pressures as transitory, and this CPI release is not seen pressuring them to start tapering the ultra-easy monetary policies that have helped the U.S. economy start to recover from the pandemic.

“We also do not expect the pickup in production and international trade costs – evident in the upside surprises in PPI inflation last week – to have a meaningful impact on the CPI, with such costs representing a relatively small input to consumer prices,” said analysts at ABN Amro, in a note. 

“As such, the outlook for inflation remains a broadly benign one, and we expect the Fed to therefore fully look through this bounce in inflation.”

Elsewhere, NZD/USD rose 0.7% to 0.7101, benefiting from the weaker greenback tone even as New Zealand's central bank held its official interest rate and asset purchase programme steady, widely as expected.

USD/RUB fell 0.4% to 75.63 after U.S. President Joe Biden proposed a summit with Russian President Vladimir Putin to tackle a raft of disputes, attempting to reduce tensions following a Russian military build-up on Ukraine's border.

 

Dollar Weakens After Inflation Data Calms Tapering Fears
 

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Comments (9)
CHAD TENDIES
CHAD TENDIES Apr 14, 2021 8:06AM ET
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They will never taper they do not have a choice. The second they taper the entire ponzi collapses
Notvery Goodathis
Peteymcletey Apr 14, 2021 7:29AM ET
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"While these figures were above consensus expectations, there were some in the market that expected a sharper rise in inflation" so it didn't move higher because the it was worse than consensus opinion. but a few random people expected the worst. so those 1% being wrong means market boom time
Kamrul Islam
Kamrul Islam Apr 14, 2021 6:21AM ET
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Catharine Varady
Catharine Varady Apr 14, 2021 6:13AM ET
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fortunately no black lives matter movement like it was when a police killed george floyd. otherwise it puts more preasure to usd. such accident is getting more normal, evident by no looting or protest
Tariq Aslam
Tariq Aslam Apr 14, 2021 6:08AM ET
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Can`t wait for fed to react
Jaybee Bueno
Jaybee Bueno Apr 14, 2021 5:46AM ET
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nice
Kevin Avila
Kevin Avila Apr 14, 2021 5:19AM ET
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Dollar is worthless...
Chinedu Amankulor
Chinedu Amankulor Apr 14, 2021 3:40AM ET
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misstatements! fed hasn't reacted to new CPI numbers.
hakeem mallo
hakeem mallo Apr 14, 2021 3:18AM ET
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the dollar will continue weakening
 
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