Investing.com - The dollar remained steady against a basket of the other major currencies on Tuesday, after data showing that the cost of living in the U.S. rose at the fastest pace in five months in September.
The Labor Department reported that the consumer price index rose 0.3% last month, matching economists’ forecasts after a 0.2% increase in August.
On a year-over-year basis, consumer prices rose 1.5%, the most since October 2014 and up from 1.1% in August.
Core inflation, which excludes volatile food and fuel costs, rose 0.1% the Labor Department said.
The pickup in inflation indicated that the economy may be able to sustain higher interest rates.
Expectations of higher interest rates typically boost the dollar by making it more attractive to yield seeking investors.
The dollar backed off seven-month highs against the other major currencies on Monday after Federal Reserve Vice Chairman Stanley Fischer said that economic stability could be threatened by low interest rates, but it was "not that simple" for the Fed to raise rates.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 97.77 from around 97.78 ahead of the data.
Sterling bounced higher, with GBP/USD rising 0.8% to 1.2283 following reports that the U.K. parliament would have to ratify Britain's deal to exit the European Union.
Earlier Tuesday, official data showed that the annual rate of inflation in the U.K. rose at the fastest rate in 22 months in September, amid a sharp fall in sterling in the aftermath of the June 23 Brexit vote.
The Office for National Statistics reported that the U.K. consumer price index jumped to 1% in September, above forecasts for a 0.9% increase from 0.6% in August.
It was the highest inflation rate since November 2014.
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