Dollar ends lower on U.S. inflation data and falling yields
|The greenback ended the day lower against majority of its peers on Tuesday as despite the release of upbeat U.S. CPI data, it wasn't considered strong enough for the Federal Reserve to alter its monetary policy together with a fall in U.S. Treasury yields.
Reuters reported U.S. consumer prices increased by the most in more than 8-1/2 years in March and underlying inflation picked up as more parts of the economy reopened thanks to increased vaccinations and massive fiscal stimulus. The consumer price index jumped 0.6% last month, the largest gain August 2012, after rising 0.4% in February, the Labor Department said on Tuesday. Excluding the volatile food and energy components, the CPI rose 0.3%. The so-called core CPI nudged up 0.1% in February. Economists polled by Reuters had forecast the overall CPI advancing 0.5% and the core CPI climbing 0.2%.
Versus the Japanese yen, the greenback initially rose from 109.36 in Australia to session highs of 109.75 in Asia. However, the pair then erased intra-day gains and fell to 109.14 in Europe on selloff in U.S. Treasury yields as well as cross-buying in jpy. Despite a knee-jerk rebound to 109.59 at New York open after the release of U.S. CPI data, price then tumbled again to 109.02 on usd's broad-based weakness.
The single currency initially fell from 1.1916 in Australia to 1.1884 at European open before rebounding to 1.1908. Despite a brief drop to session lows of 1.1878 at New York open, the pair erased intra-day losses and rallied to a near 3-month high of 1.1955 in New York renewed usd's broad-based weakness due to drop in U.S. yields before easing.
Reuters reported the European Central Bank should spell out its tolerance for overshooting its inflation target, ECB policymaker Francois Villeroy de Galhau said on Tuesday. "Rather than flexible average inflation targeting, which leaves many questions unanswered, my preferred option would be the use of a strengthened and non-linear forward guidance, mentioning explicitly our tolerance for inflation overshooting, with reference to past inflation shortfalls," Villeroy said at an online event hosted by the Peterson Institute for International Economics.
The British pound met renewed selling at 1.3756 in Australia and fell to 1.3725 in Asia before rallying to an intra-day high of 1.3770 (Reuters) in Europe. Cable then erased intra-day gains and tumbled to session lows of 1.3695 on cross-selling in sterling before staging a rebound to 1.3757 on drop in U.S. Treasury yields.
Data to be released on Wednesday :
Japan machinery orders, China exports, trade balance, Australia consumer sentiment, New Zealand RBNZ interest rate decision, EU industrial production, U.S. MBA mortgage app, import prices, export prices.
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