Greenback loses ground after US inflation report

The U.S. dollar index lost ground on Friday after U.S. consumer prices rose roughly in line with expectations last month, with investors, who feared much higher inflation, betting the actual number would not change. the pace of interest rate increases.

In Taipei, the New Taiwan Dollar fell against the greenback, losing NT $ 0.027 to close at NT $ 27.737 to the US dollar, little change from last week’s NT $ 27.723.

Data from the US Department of Labor showed an increase in the Consumer Price Index (CPI) as the cost of goods and services rose overall amid supply constraints for the largest annual increase since 1982.

The CPI rose 0.8% last month after jumping 0.9% in October, while in the 12 months to last month it rose 6.8%, following a 6.2% increase in October. This compares to a forecast of 0.7% of economists polled by Reuters.

“Going into the report, there was concern that it might get a little warmer,” said Mazen Issa, senior currency strategist at TD Securities. “Considering how the dollar traded prior to the report, this is more of a rally of relief against other currencies.”

Investors were waiting for an above-consensus reading on inflation and the possibility that such a reading would lead the US Federal Reserve to signal a faster-than-expected pace of interest rate hikes after the next Federal Open Market Committee meeting ( FOMC), which ends Wednesday.

“Today is not going to change next week’s message. We’re going to see a hawkish Fed. We’re going to see a dot plot that moves higher,” Issa said.

With the US dollar index rising nearly 7% year-to-date, Issa said “a lot has been built already,” but with foreign central banks appearing less hawkish than the Fed, he there was no credible alternative for currency investors.

“It’s going to be difficult to make the dollar disappear in the face of what is expected to be high inflation at least until the start of the second quarter. That’s the challenge, ”he said.

Against a basket of rivals, the US dollar moved into negative territory following the CPI announcement and continued to decline as the day progressed with choppy trading.

The index fell 0.23 percent to 96.05, down 0.07 percent for the week.

The US dollar was down 0.02% against the Japanese yen on Friday.

The British pound appreciated on Friday after the greenback lost ground after US inflation data. The British pound was last traded up 0.28% to US $ 1.3257.

The euro appreciated 0.17% to US $ 1.1312.

While Greg Anderson, global head of currency strategy at BMO Capital Markets, said the forex market has positioned itself for a higher inflation reading, he was less optimistic about the dollar otherwise. of the year.

CNA Supplementary Reports, with Editor-in-Chief

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