NEW YORK – The US dollar dipped, giving back some of the strong gains from the previous day, as investors gauged the latest round of sanctions on Russia and US inflation data was seen as unlikely to make the Federal Reserve overly aggressive at its next policy meeting.
The greenback on Thursday notched its biggest one-day percentage gain since Nov. 10 to reach 97.74, its highest since June 30, 2020. However, it gave back some gains after US President Joe Biden hit Russia with a wave of sanctions following that country’s invasion of Ukraine, but refrained from imposing sanctions on Russian President Vladimir Putin and disconnecting Russia from the SWIFT international banking system.
US economic data showed consumer spending increased more than expected in January even as price pressures mounted, with annual inflation hitting rates last seen four decades ago, although the personal consumption expenditures price index increased 0.6 percent in January after rising 0.5 percent in December.
“The revisions to income and spending data shows the economy was very resilient to Omicron and to high oil prices. Hopefully, the situation with Russia is short-lived, but even if oil prices stay elevated, the economy should have enough fundamental strength to tolerate high energy prices,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.
“The inflation numbers weren’t great, but at least the month-on-month inflation numbers aren’t moving higher,” Jacobsen said. “That should take some wind out from under the wings of the most hawkish Fed members.”