Dollar at 2021 high after hot U.S. inflation

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SYDNEY (Businesshala) – The dollar rose to a 2021 high against sterling and the euro on Thursday, while the yen was smarting from its sharpest drubbing in a month, on rate hikes after the warmest US inflation reading in a generation. staking out.

FILE PHOTO: A pack of US five-dollar bills is inspected at the Bureau of Engraving and Printing in Washington March 26, 2015. Businesshala/Gary Cameron//file photo/file photo

US consumer prices rose last month at the fastest annual pace since 1990, the data showed, and traders expect the Federal Reserve to react by raising interest rates faster than peers in Europe and Japan. can give.

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The euro was hit as the European Central Bank was seen lagging behind in policy tightening, and slipped to $1.1465 on Thursday, its lowest since July 2020. It is without major chart support near $1.12.

On Thursday, sterling was also down marginally at an 11-month low of $1.3393. The yen extended recent gains sharply to 114.15 per dollar and the Australian and New Zealand dollars formed one-month troughs.

“The markets are still conferring credibility on the Fed to an extent, that they will not allow very high inflation to continue indefinitely,” said Ray Attrill, head of FX strategy at National Australia Bank.

He added that even though other central banks are eyeing similar moves, a move in the dollar index above 95 could prompt investors to exit the path of the rising greenback.

“It’s a pretty big level technically and if we can break through it there will be more people throwing in the towel.” The index ticked at 95.002 on Thursday.

Emerging market currencies also faced broader dollar gains, with MSCI’s EM Currency Index recording its sharpest fall in two months.

The increase in Treasury yields, which rise when prices fall, has opened the gap between the five-year US yield and yields in Japan and Germany to their widest — in favor of the Treasury — since early 2020. [US/]

Elsewhere, Japanese wholesale inflation hit a four-decade high on Thursday.

A job report in Australia showed an unexpected rise in unemployment, although the timing of the report – amid the staggered lifting of pandemic lockdowns of large cities – made the figures difficult to interpret.

The Australian and New Zealand dollars still slipped, with the Australian dollar falling 0.4% to a one-month low of $0.7298 and the kiwi down 0.3% to $0.7038. [AUD/]

Further dollar gains depend on clues about the Fed’s thinking, and whether a surge in inflation — which also fueled selling in stock markets — puts a broader load on the mood.

“From a foreign exchange perspective, we are at an impasse,” said Deutsche Bank strategist Alan Ruskin.

“On the dollar we have the classic dilemma – if the Fed won’t respond to high inflation it’s the dollar negative; if the Fed tightens up it’s the USD positive. Right now the dollar is largely stuck between these two worlds.”

British growth figures are due later in the day.

Reporting by Tom Westbrook.; Editing by Lincoln Feast and Sam Holmes

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