NEW YORK- The US dollar touched a one-week high against a basket of currencies, extending its gains from the previous session when hot US consumer prices data reinforced expectations that the Federal Reserve may have to keep interest rates higher for longer.
The consumer price index (CPI) rose 0.4 percent in September, keeping the annual rate at 3.7 percent , the same as in August, while economists polled by Reuters had forecast it would gain 0.3 percent on the month and 3.6 percent year-on-year.
Data on Wednesday had shown US producer prices increased more than expected in September amid higher costs for energy products and food.
“Traders didn’t really believe in the hot PPI for September until CPI yesterday reinforced it,” Helen Given, FX Trader at Monex USA, said.
“I see yesterday’s big USD move as a correction to the under-reaction to PPI Wednesday,” Given said.
The dollar index which measures the US currency against six of its major peers, ticked up 0.11 percent to 106.63. The index, which jumped 0.8 percent on Thursday, its biggest one-day rise since March 15, is on pace to finish the week up 0.5 percent .
The dollar was also helped by safe-haven buying driven by the escalating Middle East conflict as Israel urged civilians to leave the northern Gaza Strip.
“Our sense is that the greenback’s renewed strength in large part also reflects growing economic and geopolitical uncertainty in the wake of the new war between Hamas and Israel,” Jonas Goltermann, deputy chief markets economist at Capital Economics, said in a note.
Commentary from Fed speakers is likely to keep the dollar supported.
Federal Reserve Bank of Philadelphia President Patrick Harker said Friday he believes the central bank is likely done with rate hikes amid an ongoing waning in price pressures, while flagging the uncertainty of how long rates will need to remain elevated. – Reuters
