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Dollar Falls As Tapering Hopes Ease After Tepid U.S. Inflation Data

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The U.S. dollar depreciated against its major counterparts in the European session on Tuesday, as a slowdown in the nation's consumer inflation for August diminished hopes for an immediate move to taper asset purchase program by the U.S. Federal Reserve.

Data from the Labor Department showed that consumer prices increased slightly less than expected in the month of August.

The Labor Department said its consumer price index rose by 0.3 percent in August after climbing by 0.5 percent in July. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices inched up by just 0.1 percent in August after rising by 0.3 percent in July. Economists had been expecting another 0.3 percent increase.

The report also showed a slowdown in the annual rate of consumer price growth, which dipped to 5.3 percent in August from 5.4 percent in July.

The annual rate of core consumer price growth also slowed to 4.0 percent in August from 4.3 percent in the previous month.

The Federal Open Market Committee is due to meet on September 21 and 22 and economists expect the U.S. central bank to discuss the timeline to begin tapering of the asset purchase program.

Several Fed officials have signaled that the central bank could start tapering asset purchases this year, despite weak jobs data and pandemic concerns.

The greenback showed mixed performance against its major peers in the Asian session. While it held steady against the pound and the euro, it rose against the franc and the yen.

The greenback declined to 0.9183 against the franc, down from yesterday's trading close of 0.9210. Should the greenback falls further, it is likely to test support around the 0.90 region.

Data from the Federal Statistical Office showed that Switzerland's producer and import prices increased in August.

Producer and import prices rose 4.4 percent year-on-year in August.

The greenback lost 0.3 percent to reach a 4-day low of 1.1846 against the euro. The pair was worth 1.1810 when it closed deals on Monday. The greenback may face support around the 1.20 region, if it falls again.

Extending its early drop, the greenback touched near a 6-week low of 1.3913 against the pound. The GBP/USD pair had ended yesterday's trading session at 1.3839. The greenback is likely to challenge support near the 1.41 mark.

Data from the Office for National Statistics showed that the UK unemployment rate decreased in three months to July and the employment rate rose quarterly.

The unemployment rate dropped 0.3 percentage points from the previous quarter to 4.6 percent in three months to July. The rate came in line with economists' expectations.

The greenback weakened 0.3 percent to 109.79 against the yen, after a rise to 110.16 at 7 am ET. The USD/JPY pair had closed Monday's deals at 109.94. Next near term support for the greenback is likely seen around the 108.00 level.

Data from the Ministry of Economy, Trade and Industry showed that Japan's industrial production declined in July, as initially estimated.

Industrial production fell a seasonally adjusted 1.5 percent monthly in July, as estimated.

The greenback slipped to a 4-day low of 1.2601 against the loonie from Monday's closing quote of 1.2644. Further fall in the greenback may find support around the 1.25 mark.

The greenback pulled back to 0.7369 against the aussie, following nearly a 2-week high of 0.7324 seen at 7:45 am ET. The greenback was worth 0.7368 per aussie at Monday's New York session close. The greenback may seek support around the 0.75 region.

The greenback reached a 4-day low of 0.7151 against the kiwi, falling from a high of 0.7102 it set at 7:45 am ET. At Monday's close, the pair was valued at 0.7117. Immediate support for the currency is likely seen around the 0.73 level.

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