The greenback pared intra-day losses made in Asia and European morning and ended Wednesday higher against majority of its peers, supported by a rise in U.S. Treasury yields together with fall in euro and sterling. The single currency dropped on negative comments from European Central Bank policymaker Francois Villeroy de Galhau.
On the data front, Reuters reported the U.S. Labor Department said on Wednesday its consumer price index increased 0.4% last month after gaining 0.2% in November. In the 12 months through December the CPI rose 1.4% after increasing 1.2% in November. Economists polled by Reuters had forecast the CPI shooting up 0.4% and rising 1.3% year-on-year.
Versus the Japanese yen, although dollar extended Tuesday's decline and fell to session lows of 103.53 in Asian morning, price found renewed buying and later rose to an intra-day high of 103.99 in Europe on usd's strength and rebound in U.S. Treasury yields before retreating to 103.76 in New York on profit-taking.
Although the single currency gained to 1.2219 in Asia, then marginally higher to 1.2222 at European open, renewed selling emerged and knocked price down to 1.2155 in New York morning on comments from ECB's policymaker Francoise Villeroy before recovering to 1.2180 but only to fall again to session lows of 1.2140 in New York afternoon.
Reuters reported the European Central Bank is keeping a close eye on exchange rate developments and their negative impact on inflation, ECB policymaker Francois Villeroy de Galhau said on Wednesday. Although it has in recent days shed some gains, the euro has recently been trading at its highest level since the first half of 2018, which hurts euro zone exports and makes imports like oil cheaper, weighing on inflation.
The British pound extended its rally from Tuesday and rose to 1.3693 in Asian morning and then edged higher to a 1-week high of 1.3701 in Europe before falling to 1.3654 on renewed usd's strength. However, the pair then recovered again to 1.3694 at New York open on cross-buying in sterling but only to tumble to session lows of 1.3613 on buying in the greenback.
Reuters reported British Prime Minister Boris Johnson said on Wednesday there were teething problems in trade between Britain and its province of Northern Ireland but that goods were flowing effectively and in normal volumes. "Goods are flowing effectively and in normal volumes between Great Britain and Northern Ireland ... There are teething problems ... but I can confirm ... that if there are problems that we believe are disproportionate then we will have no hesitation in invoking Article 16," he told parliament. Article 16 of the Northern Irish protocol, which covers post-Brexit trade between Britain and Northern Ireland, details so-called safeguard measures, which allow either party to take unilateral measures if there is an unexpected negative effect arising from the agreement.
Data to be released on Thursday :
Japan corporate goods price index, machinery orders, UK RICS housing price balance, China exports, imports, trade balance, Germany full year GDP, and U.S. import price index, export price index, initial jobless claims, continued jobless claims.
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