The Sticky US Inflation Readout, Dollar Makes New Level
On Wednesday, the dollar found some support after persistently high US inflation suggested that interest rates would remain high for longer than investors had anticipated.
The headline CPI was 0.5 percent in January, owing primarily to higher rental and food costs. The annual figure of 6.4 percent was slightly higher than expected, and traders were busy unwinding bets on the rate falling toward the end of 2023.
The US dollar rose to a six-week high of 133.30 yen before falling back to 132.73 early in the Asian session. Other currency pairs were a little more volatile, but the US dollar, which had been steadily falling in January, is holding its own.
"Inflation remains excessive," said Commonwealth Bank of Australia strategist Joe Capurso.
"A tentative slowing of inflation is now more difficult to detect. There isn't much good news for (the Fed), which expects inflation to fall much further towards its 2% target."
According to Federal Reserve officials, the US central bank will need to keep gradually raising interest rates to beat inflation.
"We must remain prepared to continue raising rates for a longer peperiodhan than previously anticipated," Dallas Fed President Lorie Logan said.