The greenback erased its losses from soft U.S. inflation data and ended the day higher against majority of its peers except yen and swiss franc on Tuesday as concerns about global growth triggered risk-averse usd buying.
Reuters reported underlying U.S. consumer prices increased at their slowest pace in six months in August, suggesting that inflation had probably peaked, though it could remain high for a while amid persistent supply constraints. The Labor Department said on Tuesday its Consumer Price Index excluding the volatile food and energy components edged up 0.1% last month. That was the smallest gain since February and followed a 0.3% rise in July. The so-called core CPI increased 4.0% on a year-on-year basis after advancing 4.3% in July. The overall CPI rose 0.3% last month after gaining 0.5% in July. In the 12 months through August, the CPI increased 5.3% after soaring 5.4% year-on-year in July.
Versus the Japanese yen, dollar traded with a firm bias and gained to 110.10 in Asian morning before retreating to 109.96 in early European morning. The pair then briefly rose to session highs at 110.15 ahead of New York open before falling to an intra-day lows at 109.53 in New York on sharp fall in U.S. Treasury yields before staging a short-covering rebound to 109.69.
The single currency traded with a firm bias in Asia and gained to 1.1829 in early European morning before retreating to 1.1801 ahead of New York open due to cross-selling in euro especially vs sterling. The pair then erased its losses and rallied to an intra-day at 1.1845 on usd's broad-based weakness in New York after release of soft U.S. CPI but only to tumble to 1.1800 on renewed usd's strength.
The British pound traded sideways in Asia and found renewed buying at 1.3830 at European open and gained to 1.3882 in European morning due to cross-buying in sterling. Despite rallying to a 1-month peak at 1.3913 in New York on soft U.S. CPI, cable then fell to an intra-day low of 1.3804 on broad-based rebound in usd as well as cross-selling in sterling.
Data to be released on Wednesday:
New Zealand current account, Japan machinery orders, tertiary industry activity, Australia consumer sentiment, China industrial output, retail sales, Germany wholesale price index, U.K. CPI, RPI, PPI input prices, PPI output prices, DCLG house price index, France CPI, Italy CPI, EU industrial production, labour costs, U.S. MBA mortgage application, NY Fed manufacturing, import prices, export prices, industrial production, capacity utilization, manufacturing output, NAHB housing market index and Canada CPI.
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