NEW YORK – The dollar edged higher against a basket of currencies, paring some of the week’s losses, as a stronger-than-expected rise in US and Chinese inflation gauges drove up bond yields.
The US Dollar Currency Index, which measures the greenback against a basket of six currencies, was 0.10 percent higher at 92.163.
“We’re seeing a consolidation in the broad US dollar today after a week of losses as inflation data from China and the US sparks the US treasury curve back into life,” said Simon Harvey, currency analyst at broker Monex Europe.
Data on Friday, showed US producer prices increased more than expected in March, resulting in the largest annual gain in 9-1/2 years, fitting in with expectations for higher inflation as the economy reopens amid an improved public health environment and massive government funding. (Full Story)
Inflation is expected to heat up this year, driven by pent-up demand and as the weak readings last spring drop out of the calculation. Prices tumbled early in the pandemic amid mandatory closures of non-essential businesses across many states to slow the first wave of COVID-19 infections.
Most economists and Federal Reserve officials believe higher inflation will be transitory because of labor market slack.
Earlier on Friday, data showed China’s factory gate prices beat analyst expectations and rose at their fastest annual pace since July 2018 in March, the latest sign that a recovery in the world’s second-largest economy is gathering momentum.
The dollar was also helped by data showing a second straight monthly drop in industrial production in Germany, further boosting the likelihood of Europe’s biggest economy having contracted in the first quarter.
