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.