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Dollar Appreciates As U.S. Inflation Jumps To 31-year High

dollar 080219 10nov21 lt

The U.S. dollar spiked higher against its major peers in the European session on Wednesday, after a data showed that the annual rate of inflation in the country accelerated in October to the highest level since 1990.

Data from the Labor Department showed that U.S. consumer prices increased more than expected in the month of October.

The annual rate of growth in consumer prices accelerated to 6.2 percent in October from 5.4 percent in September.

Core CPI jumped 4.6 percent on a year-on-year basis, up from 4.0 percent in September, reflecting the biggest jump in prices since August of 1991.

The consumer price index rose 0.9 percent on month in October after rising by 0.4 percent in September. Economists had expected consumer prices to climb by 0.6 percent.

Excluding higher prices for food and energy, core consumer prices still increased by 0.6 percent in October after inching up by 0.2 percent in September. Core prices were expected to rise by 0.4 percent.

St. Louis Fed President James Bullard told Fox Business Network on Monday that the central bank is likely to raise rates twice next year after ending its bond purchase program.

If inflation is more persistent, the Fed may have to take action a little sooner to keep it under control, Bullard added.

The greenback rose in the Asian session amid safe-haven status, as a spike in consumer and producer prices in China fueled inflation concerns.

The greenback edged up to 0.9150 against franc, up from yesterday's trading close of 0.9111. Further rally in the currency may challenge resistance around the 0.93 level.

The greenback was up by 0.5 percent against the euro, at a 5-day high of 1.1533. The pair was worth 1.1594 when it closed deals on Tuesday. The greenback may face resistance around the 1.13 region, if it gains again.

Final data from Destatis showed that German consumer price inflation rose at the fastest pace since 1993 on energy prices.

Consumer price inflation advanced to 4.5 percent in October, as initially estimated, from 4.1 percent in September. A higher inflation rate of 4.6 percent was last measured in August 1993.

The greenback gained 0.6 percent against the pound, reaching a 2-day high of 1.3480. The pound-greenback pair had ended yesterday's trading session at 1.3556. Immediate resistance for the dollar is likely seen around the 1.31 level.

The greenback added 0.6 percent to hit a 2-day high of 113.49 against the yen. The pair had closed Tuesday's deals at 112.84. Extension of the greenback's upward trading is likely to lead it to a resistance around the 116.00 level.

In contrast, the greenback weakened to a 6-day low of 1.2387 against the loonie, from a high of 1.2459 seen at 8:30 am ET. The greenback was trading at 1.2435 against the loonie at yesterday's close. The greenback is likely to challenge support around the 1.22 mark.

The greenback pulled back to 0.7393 against the aussie and 0.7124 against the kiwi, after climbing to a 4-week high of 0.7341 and a 5-day high of 0.7076, respectively soon after the data. The greenback is seen facing support around 0.76 against the aussie and 0.74 against the kiwi.

U.S. monthly budget statement for October is due in the New York session.

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