Dollar Holds Gains amid Inflation; Bitcoin Recovers in Part

The dollar held on to its gains in early European forex trade on Thursday after strengthening previously. The currency firmed up in the previous session after an unexpected large rise in U.S. consumer prices stirred inflation worries.

Data showed that in nearly 12 years, U.S. consumer prices increased by the most in April. This sparked a “risk-off” move in global markets. Equities and riskier currencies dropped while U.S. Treasury yields rose.

U.S. weekly jobless claims are due at 1230 GMT as well as retail sales numbers on Friday. Markets are eyeing these data for guidance on whether upward pressure on prices will persist.

The weak job growth and strong inflation in April had not changed the central bank’s plan to maintain loose monetary policy. This was a statement from the U.S. Federal Reserve Vice Chair Richard Clarida on Wednesday.

Currencies Movements

At 0758 GMT, the dollar index was steady at 90.734. This was in comparison to a high of 90.798 on Wednesday.

In a note to clients, ING strategists wrote that risk-averse currency market moves were unlikely to persist. Moreover, the dollar index would weaken back below 90 in the coming weeks, the note said.

The ING further said that while surging prices are a clear world-wide phenomenon and they agree that the Fed will have to hike earlier than it currently indicates, an imminent tightening from the Fed seems unlikely. 

Against the dollar, the Aussie lost 0.3% at 0.77055, extending losses after its biggest daily drop since March on Wednesday.

The New Zealand dollar briefly rose but was last down 0.2%.  This came after Prime Minister Jacinda Ardern said she was exploring quarantine-free travel with other countries. 

Euro added 0.1% at $1.2084 . 

In Japan, the yen was flat against the greenback, with the pair changing hands at 109.675 .

Bitcoin Bounces Back

Following Elon Musk’s tweet that Tesla Inc will no longer accept the cryptocurrency for car purchases, Bitcoin plunged 17% overnight. It fell to its lowest since March 1, from around $54,819 to $45,700.

The cryptocurrency recovered in part though, during the Asian session and rose 3% at around $50,908 at 0759 GMT.

The second biggest cryptocurrency after bitcoin, Ether, followed a similar pattern. It bounced back after dropping 14%. On Wednesday, Ether hit another record high, now up around 440% on the year.