Dollar Lowers as Inflation Data Calms Fears

Dollar Lowers as Inflation Data Calms Fears

The dollar was lower in early European forex trade on Wednesday. Falling bond yields pushed the currency down to three-week lows after the rise in U.S. inflation in March didn’t change the Federal Reserve’s stance. 

The Dollar Index was down 0.2% at 91.683 at 2:55 AM ET (0755 GMT), falling to its lowest level since March 22.

In March, the U.S. consumer price index (CPI) added 0.6% versus the previous month, the largest gain since August 2012. Moreover, it rose 2.6% from a year earlier, both 0.1 percentage points above market expectations.

These figures were above consensus expectations, but there were some in the market that expected a sharper rise in inflation. That is with the extent of pent up demand due to hefty fiscal stimulus and a successful vaccination program.

The yield on the benchmark 10-year U.S. Treasury note slid to 1.620%, in contrast to the 1.78% level seen at the end of March.

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

Currencies Movements

The USD/JPY pair fell 0.2% at 108.83, touching its lowest level in three weeks. On the other hand, EUR/USD climbed 0.2% to 1.1967, touching its highest level since mid-March.

GBP/USD added 0.3% to 1.3791, while the risk-sensitive AUD/USD edged up 0.5% to 0.7676.

The NZD/USD gained 0.7% to 0.7101, benefiting from the weaker greenback. This was despite New Zealand’s central bank holding its official interest rate and asset purchase programme steady, as expected.

USD/RUB dropped 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. This comes with an objective to reduce tensions following a Russian military build-up on Ukraine’s border.

The Singapore dollar advanced 0.25% to S$1.3376 as the Monetary Authority of Singapore (MAS) left its exchange-rate policy settings unchanged.

Earlier in forex trade, the USD/CNY pair inched down 0.05% to 6.5400. The Canadian dollar (CAD) strengthened against the USD on Tuesday as oil rose and the greenback retreated. The loonie bounced back from an earlier six-day low.

In cryptocurrencies, bitcoin has reached a record high of $64,895. That was before the listing of cryptocurrency platform Coinbase on Nasdaq later in the day.

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