Dollar Depreciates Following U.S. Inflation Data

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The U.S. dollar slipped against its major opponents in the European session on Wednesday, as the nation's annual inflation rose in line with expectations in December, reducing some of the worries about an aggressive tightening of monetary policy by the U.S. Federal Reserve.

Data from the Labor Department showed that U.S. consumer prices jumped 7.0 percent year-on-year in December, as expected, after gaining 6.8 percent in November.

Core consumer prices, which exclude food and energy prices, were up by 5.5 percent year-over-year in December compared to the 4.9 percent spike in November.

On a monthly basis, the consumer price index rose by 0.5 percent in December following a 0.8 percent advance in November. Economists had expected consumer prices to rise by 0.4 percent.

Core consumer prices increased by 0.6 percent in December after climbing by 0.5 percent in November. Core prices were expected to advance by 0.5 percent.

In his Congressional testimony, Federal Reserve Chair Jerome Powell sounded less hawkish than expected and didn't give any hint on the timing of the first rate hike.

Powell added that policymakers were still discussing approaches to shrink the Fed's balance sheet and the move could start later this year.

The currency showed mixed trading against its major opponents in the Asian session. While it fell against the euro and the pound, it held steady against the yen and the franc.

The greenback lost 0.2 percent to touch a 2-day low of 115.05 against the yen. The pair had closed Tuesday's deals at 115.29. Immediate support for the greenback is likely located around the 112.00 level.

Data from the Ministry of Finance showed that Japan posted a current account surplus of 897.3 billion yen in November - down 48.2 percent on year.

That still beat forecasts for a surplus of 585 billion yen following the upwardly revised 1.180 trillion yen surplus in October (originally 1.018 trillion yen).

The greenback was down by 0.5 percent against the franc, at a 2-day low of 0.9185. At yesterday's trading close, the pair was quoted at 0.9231. Should the greenback dips further, 0.90 is possibly seen as its next support level.

The greenback declined to its lowest level since November 15 against the euro, at 1.1422. The pair was worth 1.1366 when it closed deals on Tuesday. The greenback is seen facing support around the 1.16 level.

Data from Destatis showed that Germany's wholesale price inflation moderated in December but remained at an elevated level.

Wholesale prices increased 16.1 percent year-on-year in December, following November's 16.6 percent increase, the fastest growth since 1962.

The greenback dropped 0.4 percent against the pound, touching over a 2-month low of 1.3694. The pound-greenback pair had ended yesterday's trading session at 1.3635. Further drop in the currency may challenge support around the 1.39 level.

The greenback fell to nearly a 2-month low of 1.2508 against the loonie from Tuesday's close of 1.2571. The greenback is likely to find support around the 1.23 region.

The greenback touched 0.7281 against the aussie, its weakest level since November 19. The greenback was worth 0.7210 per aussie at Tuesday's New York session close. Extension of downward trading may see the greenback finding support around the 0.75 region.

The U.S. currency was trading at a 9-day low of 0.6844 against the kiwi, down from yesterday's closing value of 0.6784. Next key support for the greenback is likely seen around the 0.70 level.

U.S. monthly budget statement for December will be published in the New York session.

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