Dollar falls on broad-based profit taking after hitting 32-year high vs yen on hot US CPI

The greenback surrendered its gains made after release of hot U.S. inflation data and ended the day lower against its peers on Thursday as strong rebound in U.S. stocks after initial losses prompted investors to book profits on recent usd long positions.   
  
Reuters reported Wall Street stock indexes made a dramatic recovery, closing sharply higher after an earlier sell-off on Thursday while the dollar gave up earlier gains as investors poured back into riskier bets after digesting a red-hot U.S. inflation reading that fueled bets for a big Federal Reserve rate hike next month. The Dow closed up 2.52% or 734 points at 29945 after falling to 18660 after the data. U.S consumer prices increased more than expected in September and underlying inflation pressures continued to build up, reinforcing expectations that the Federal Reserve will deliver a fourth 75-basis points interest rate hike next month.

The consumer price index rose 0.4% last month after gaining 0.1% in August, the Labor Department said on Thursday. Economists polled by Reuters had forecast the CPI climbing 0.2%.

Some of the inflation pressures are coming from the tight labor market. A second report from the Labor Department on Thursday showed the number of Americans filing new claims for unemployment benefits increased moderately last week. Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 228,000 for the week ended Oct. 8.    
Economists had forecast 225,000 applications for the latest week. The labor market remains tight. There were 1.7 job openings for every unemployed person on the last day of August, and layoffs also remain low.  
  
Versus the Japanese yen, dollar traded sideways in Asia before retreating to 146.6 ahead of New York open. The pair briefly jumped and briefly penetrated 1998 high at 147.64 to a 32-year peak of 147.67 after release of U.S. inflation data before spiking down to 146.47 on market chatter of possible BoJ's intervention. However, price then pared its losses and rebounded strongly to 147.50 in New York morning due to active yen selling before retreating in tandem with U.S. yields to 146.85.  
  
The single currency remained under pressure in Asia and edged down to 0.9686 in early European morning. The pair then rebounded to 0.9752 ahead of New York open before tumbling to session lows at 0.9632 after U.S. inflation data but only to rally to 0.9802 on broad-based usd's weakness due to intra-day strong bounce in U.S. stocks.  
  
The British pound also remained under pressure and edged down to 1.1058 in early European morning. The pair rallied to 1.1300 on news of u-turn by U.K. government in its mini-budget. Although price retreated sharply to 1.1152 in New York after hot U.S. CPI, cable later regained traction on broad-based weakness and later rallied to 1.1380.  
  
Reuters reported the British government is discussing making changes to the fiscal plan announced last month and looking at which parts of the tax-cutting package might be ditched in a further U-turn by Prime Minister Liz Truss, Sky News reported on Thursday. "Downing Street denying any changes to mini budget but I'm told by sources discussions underway over which bits might yet be junked give the scale of the concern," Sam Coates, Sky News' deputy political editor, said on Twitter. Truss's spokesperson earlier said the government's position had not changed.  
  
Data to be released on Friday:  
  
New Zealand manufacturing PMI, China PPI, CPI, exports, imports, trade balance, Japan tertiary industrial activities, Germany wholesale price index, France CPI, EU trade balance, U.S. import prices, export prices, retail sales, business inventories, University of Michigan sentiment, Canada manufacturing sales and wholesales trade.