Gertrude Chavez-Dreyfus
NEW YORK (Reuters) – The dollar rose to a three-month high on Tuesday after data showed U.S. inflation rose more than expected in January, fueling expectations that the Federal Reserve will keep interest rates in March.
Following the release of the data, the US dollar also surpassed 150 yen for the first time since November.
Tuesday’s data showed the consumer price index (CPI) rose 0.3% month on month in January, beating the 0.2% rise expected by economists polled by Reuters. On an annualized basis, it gained 3.1% against forecast growth of 2.9%.
Excluding volatile food and energy components, the consumer price index rose 0.4% last month after rising 0.3% in December. Core consumer price index rose 3.9% year on year in January, matching December’s rise.
The dollar rose to 150.58 yen, a three-month peak. The price was last up 0.7% at 150.44 yen. The 150 level is likely to trigger further attacks from Japanese officials in an attempt to prop up the currency, analysts said.
The yen, which has fallen more than 5% against the dollar this year, has been under continued pressure as investors lower their expectations about the size and pace of the Federal Reserve’s easing cycle.
The pair turned positive after the release of inflation data, which reached a three-month high of 104.87. It was last up 0.6% at 104.80.
“The Fed has signaled that it’s going to move slowly, and I think today’s data, as well as last week’s jobs data, show they’re right about that,” said Russell Price, chief economist at Ameriprise Financial (NYSE). 🙂 in Troy, Michigan.
“I think their message was correct and the market message that a contraction is coming appears to be wrong.”
Fed funds futures on Tuesday were calling for no rate cut in March and a less than 50% chance of easing in May, according to LSEG supplement. The Fed’s first rate cut is expected to occur at the June meeting with a probability of approximately 80%.
In other currencies, the euro fell 0.6% to $1.0705 after earlier falling to $1.0700, its weakest since mid-November. In cryptocurrencies, Bitcoin hit its highest level since December 2021 at $50,383 but fell below $50,000 following the release of the Consumer Price Index data. It was last down 1.0% at $49,307. The world’s largest cryptocurrency is up nearly 18% this year, boosted by a regulatory decision last month on U.S.-listed exchange-traded funds designed to track its price.