Dollar maintains advances following strong US inflation; attention now is on China data

13 Oct 2023 , 09:28 AM

Stronger-than-expected U.S. consumer inflation reignited expectations that the Federal Reserve will need to keep rates higher for longer, and the dollar held steady on Friday, exerting pressure across a basket of currencies.

According to data released on Thursday, a rise in rental rates in September drove up consumer prices in the United States. The results increased the likelihood that rates would remain high for some time even though sustained moderation in underlying inflation pressures backed expectations that the Fed would not raise interest rates next month.

The dollar index, which compares the value of the dollar to six other major currencies, was at 106.49 in the early Asian morning.

The yen was last trading at 149.75 to the dollar due to the overnight strength in the dollar, which sent the Japanese currency back towards the delicate 150-line briefly hit last week.

Markets worry that the Japanese government would step in if the yen drops below 150, which some traders view as a tipping point that might prompt Tokyo to interfere as it did last year.

The day’s markets are also paying attention to a few economic reports from China, including trade data, consumer inflation, and producer prices for September.

Earlier this week, Bloomberg News reported that China is considering increasing its budget deficit for 2023 as the government gets ready to launch yet another round of stimulus measures to support the economy’s achievement of the official growth objective.

Prior to the release of the data, the offshore Chinese yuan’s exchange rate to the dollar was $7.3075.

The kiwi decreased to $0.59275 while the Australian dollar, which sometimes serves as a barometer for China’s economic expansion, increased to $0.6321.

In other news, the euro edged up about 0.1% to $1.0536 after falling against the dollar overnight.

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