Dollar swings up, down to flat after hot U.S. CPI data
Reuters
Published Feb 10, 2022 01:42
Updated Feb 10, 2022 21:30
By Herbert Lash
NEW YORK (Reuters) - The dollar swung in choppy trade on Thursday after U.S. consumer prices rose higher than forecast in January, leading markets to boost expectations for the Federal Reserve to aggressively fight soaring inflation.
The consumer price index rose 0.6% from December, the Labor Department said, while in the 12 months through January, CPI jumped 7.5%, the biggest year-on-year gain since February 1982.
The data marked the fourth straight month of annual gains in excess of 6% and made St Louis Federal Reserve Bank President James Bullard, a voting member of the Fed's policy-setting committee, "dramatically" more hawkish, he said.
The dollar index, a gauge of the greenback's value against six major currencies, initially rose almost 0.5%. It then slumped 0.4% and ended almost flat. It was last up 0.08%.
Higher interest rates typically would lift the dollar, but the market is already sufficiently long dollars, said Bipan Rai, head of FX strategy at CIBC Capital Markets.
"Markets are keen to take profits on those existing long dollar positions," Rai said. "The market has the Fed priced fairly aggressively not just for this year but for next year as well."
Chances of a 50 basis point interest-rate hike rose to more than the likelihood of a 25 basis point increase as was expected before.
The market also considered how other central banks will fight inflation that's on the rise globally, driven especially by rising commodity prices.
"This broader, widespread pricing pressures is a global story," said Edward Moya, senior market analyst at OANDA. "We're starting to see a lot of these other advanced economies are now becoming more aggressive in tackling inflation."
Rates, especially at the short end, soared after the CPI data was released. The two-year U.S. Treasury yield, which typically moves in step with rate expectations, rose 26.1 basis points to 1.609%. The yield on 10-year Treasury notes topped 2% for the first time in 2-1/2 years.
The rates market was questioning the extent of inflation, said Nancy Davis, managing partner and chief investment officer at Quadratic Capital Management LLC.
"I don't think CPI is giving us the whole picture. Given the forward guidance from the Fed, the rates market is priced for disinflation."
Earlier in Europe, the Swedish central bank kept its monetary policy plans broadly unchanged and stressed its view that surging inflation is temporary.
The dovish stance by the Riksbank led the dollar to post its biggest gain among major currencies, leading the Swedish crown to fall 2.01% versus the greenback at 9.31 per dollar.
The euro rose 0.11% to $1.1434.
The Japanese yen weakened 0.43% at 115.99 per dollar to hit a five-week low. The Bank of Japan said it would intervene in markets by offering to buy an unlimited amount of 10-year Japanese government bonds at 0.25%.
Get The App
In cryptocurrencies, Bitcoin last fell 1.11% to $43,985.20.
========================================================
Currency bid prices at 3:53PM (2053 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct Change High Bid Low Bid
Previous
Session
Dollar index 95.6370 95.5760 +0.08% -0.027% +96.0130 +95.1720
Euro/Dollar $1.1436 $1.1424 +0.12% +0.61% +$1.1495 +$1.1375
Dollar/Yen 115.9950 115.5500 +0.39% +0.76% +116.3300 +115.4800
Euro/Yen 132.66 131.99 +0.51% +1.80% +133.1500 +131.8700
Dollar/Swiss 0.9264 0.9241 +0.25% +1.56% +0.9296 +0.9228
Sterling/Dollar $1.3554 $1.3536 +0.13% +0.22% +$1.3643 +$1.3524
Dollar/Canadian 1.2719 1.2671 +0.39% +0.61% +1.2727 +1.2636
Aussie/Dollar $0.7163 $0.7181 -0.24% -1.45% +$0.7249 +$0.7148
Euro/Swiss 1.0595 1.0555 +0.38% +2.18% +1.0612 +1.0552
Euro/Sterling 0.8437 0.8441 -0.05% +0.42% +0.8447 +0.8411
NZ Dollar/Dollar $0.6671 $0.6682 -0.18% -2.55% +$0.6732 +$0.6654
Dollar/Norway 8.8070 8.8100 -0.09% -0.08% +8.8795 +8.7350
Euro/Norway 10.0741 10.0612 +0.13% +0.61% +10.1125 +10.0203
Dollar/Sweden 9.3055 9.1123 +2.19% +3.19% +9.3069 +9.0813
Euro/Sweden 10.6430 10.4145 +2.19% +3.99% +10.6475 +10.3786
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.