TOKYO- The US dollar held near a one-week high against the Japanese yen on Thursday after a hotter-than-expected consumer prices reading, while the euro was shored up by news that Washington aims to begin talks with Russia to end the war in Ukraine.
US President Donald Trump also said he would soon impose reciprocal tariffs on every country that charges duties on US imports, keeping alive fears of a widening global trade war that threatens to accelerate US inflation.
Against the yen, the dollar was down 0.06 percent at 154.33 not far off Wednesday’s high of 154.80 hit as US Treasury yields climbed following inflation reading.
US consumer prices increased by the most in nearly 1-1/2 years, up by 0.5 percent in January versus the previous month, while core index rose by 0.4 percent. Both were expected to rise by 0.3 percent.
Headline consumer price added 3.0 percent for the year, while core prices rose at an annual pace of 3.3 percent.
Market players are increasing bets the Federal Reserve will hold interest rates higher for longer, pricing in roughly 28 basis points worth of rate cuts for this year, versus around 37 basis points before the data.
“The Fed will now have ample justification to stay on hold and be able to see what government policies come into force and gauge their effects,” said Tom Nakamura, currency strategist and co-head of fixed income at AGF Investments.
Along with tariffs, US policies regarding immigration, taxes and regulation may also affect the economy’s direction.
At his second congressional hearing this week, Fed Chair Jerome Powell on Wednesday reiterated that the central bank is in no rush to cut rates.
