Dollar Down to Near Three-Week Lows as Inflation Fears Assuaged for Now

Dollar Down to Near Three-Week Lows as Inflation Fears Assuaged for Now – The dollar was down on Wednesday morning in Asia to a near three-week low against the euro and the yen, thanks to a larger-than-expected rise in the U.S. consumer price gauge.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.12% to 91.735 by 12:51 AM ET (4:51 AM GMT).

The USD/JPY pair edged down 0.14% to 108.90.

The AUD/USD pair up 0.38% to 0.7667. The NZD/USD pair gained 0.58% to 0.7092 after the Reserve Bank of New Zealand left interest rates unchanged at 0.25% in its decision handed down earlier today.

The USD/CNY pair inched down 0.05% to 6.5400 and the GBP/USD pair was up 0.22% to 1.3778.

The U.S. core consumer price index (CPI) rose 0.3% month-on-month in March, against the 0.2% growth in forecasts and February’s 0.1% growth, data released on Tuesday said. The CPI grew 0.6% month-on-month, its largest gain since August 2012.

The rise was not a surprise to some investors, however.

“Inflation has been expected to accelerate in the April-June quarter. Although the latest reading was a bit stronger than expected, it wasn’t out of the blue,” Mizuho Securities chief currency strategist Masafumi Yamamoto told Reuters.

The U.S. Federal Reserve has said that it will look through temporary increases in inflation, with investors expecting that the central bank will allow inflation to run higher than previously thought before it raises rates.

Philadelphia Fed Bank President Patrick Harker said on Tuesday it is unlikely that inflation will run out of control in 2021, however. Investors now await further comment from Fed Chairman Jerome Powell at an Economic Club of Washington event and the release of the Fed’s Beige Book, both taking place later today.

Still, investors remain wary that the U.S. economy will accelerate further, thanks to the fast pace of COVID-19 vaccination rollouts which has allowed economic activities to resume.

“Eventually there will be another large-scale fiscal stimulus, which should support the dollar,” Mizuho’s Yamamoto added.

U.S. bond yields dipped on Tuesday after an auction for 30-year bonds attracted solid demand, thus tapering down inflation worries.

The Russian rouble rose around 2% during the previous session after U.S. President Joe Biden appealed to Russian President Vladimir Putin to reduce Russia-Ukraine tensions during a phone call.

In cryptocurrencies, bitcoin traded at $63,287 after hitting a record high of $63,769 and the Nasdaq set a reference price of $250 for the direct listing of cryptocurrency exchange Coinbase Global Inc. that starts trading later in the day.

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