Dollar rises in early trade

15 Feb 2023 , 09:21 AM

After persistently rising U.S. inflation hinted that interest rates might remain high for longer than investors had anticipated, the dollar found some support on Wednesday.

January’s headline CPI was 0.5%, primarily as a result of rising food and rental prices. Although the yearly number of 6.4% was slightly higher than anticipated, the result was in line with expectations. Traders were busy unwinding bets on the rate decreasing before the end of 2023.

Early in the Asia session, the U.S. dollar was barely below that level at 132.73 yen, having soared to a six-week high of 133.30 yen. The volatility of some other currency pairs was higher, but the dollar, which declined substantially in January, is keeping steady.

Officials from the Federal Reserve indicated that in order to combat inflation, the U.S. central bank will need to maintain raising interest rates gradually.

The euro had a rocky ride but finally failed to overtake the dollar and remained at $1.0734. At 103.26, the US dollar index remained close to its 50-day moving average.

After the data, U.S. Treasuries also fluctuated, but selling persisted in Fed funds futures and at the short end to reflect increased predictions that U.S. interest rates will rise over 5.2% this year and stay above 5%.

To $0.6338, the New Zealand dollar slightly decreased.

The Australian dollar also made a jerky sideways movement as traders anticipated Philip Lowe, the head of the central bank, testifying before a parliamentary committee.

British inflation data is expected later in the day; the annual headline CPI is expected to rise to a staggering 10.3%, which is more than five times the Bank of England’s 2% target.

Strong salary figures overnight gave sterling a lift, as it last exchanged hands for $1.2178. The 450 basis point increase in Federal Reserve interest rates during the past year will be evaluated by the U.S. consumer based on upcoming retail sales data, which is also due.

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