US dollar firms as inflation data backs Fed hike; yen plunges By Reuters

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© Reuters. FILE PHOTO: US dollar banknotes are shown in this illustration taken on March 10, 2023. REUTERS/Dado Rović/Illustration/File photo

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By Gertrude Chavez-Dreyfus

NEW YORK (Reuters) – The U.S. dollar rose on Friday after data showed that inflation grew in March, albeit at a slower pace, keeping the Federal Reserve on track to raise interest rates at next week’s monetary policy meeting.

Meanwhile, the yen fell broadly, after the Bank of Japan said it would maintain ultra-low interest rates as expected, and unanimously decided not to make any changes to its Yield Curve Control (YCC) policy.

The Japanese currency fell to its lowest level since September 2008 against the euro, and its weakest level in seven weeks against the dollar.

The Euro was last up 1.5% against the Yen at 150. For the week, the European single currency was up 1.8%.

On the other hand, the dollar was last up 1.7% at 136.235 yen, posting a weekly gain of 1.6%, its best weekly performance since late February.

A measure of the dollar’s value against six major currencies, it rose 0.2% to 101.65.

Data on Friday showed that the personal consumption expenditures price index rose 0.1% in March after rising 0.3% in February. In the twelve months through March, the PCE price index rose 4.2% after rising 5.1% in February.

Excluding the volatile food and energy components, the PCE price index rose 0.3% after rising at the same rate in February. The so-called core personal consumption expenditures price index rose 4.6% year-on-year in March after rising 4.7% in February. The Fed is tracking PCE price indices for a 2% inflation target.

“It probably needs a much larger slowdown in the growth rate to get the Fed comfortable with having succeeded in its mission; that hasn’t been achieved yet,” said Joseph LaVorgna, chief US economist at SMBC Nikko Securities in New York. “It does not change the outlook (for policymakers next week).”

After the inflation data, interest rate futures prices have a 90% chance of a 25 basis point hike next week.

A separate report released on Friday showed the final reading of University of Michigan consumer confidence at 63.5 in April, up from a three-month low of 62 in March, adding to gains for the dollar. One-year inflation expectations for US consumers were 4.6 this month from 3.6 in March, boosting expectations of a rate hike, which also boosted the dollar.

Meanwhile, the euro fell 0.1% against the dollar, to $1.1017.

Economic data painted a mixed picture of growth and inflation across the eurozone, adding to uncertainty about the size of the European Central Bank’s expected interest rate hike next week.

Preliminary data showed gross domestic product in the eurozone grew by 0.1% in the first quarter, below expectations in a Reuters poll of 0.2%.

The European single currency fell much more earlier in the session, but trimmed losses as investors sold the yen against the euro. That extended to the euro/dollar cross.

“We believe the balance of probabilities is gradually shifting in favor of the dollar,” Jonathan Petersen, chief market economist at Capital Economics, wrote in a research note.

“The system of ‘golden blocks’ of stronger activity data outside the US appears to be fading, and we expect the dollar to benefit from safe-haven demand once the global growth picture begins to deteriorate significantly in the coming months.”

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Coin bid prices at 3:26 PM (1926 GMT)

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

previous change

a class

Dollar Index 101.6400 101.4500 +0.20% -1.788% +102.1700 +101.4200

EUR/USD 1.1018 USD 1.1029 -0.10% + 2.83% + 1.1045 USD + 1.0963 USD

USD/JPY 136.2350 134.0100 +1.66% +3.91% +136.5600 +133.3600

EUR/JPY 150.00 147.77 +1.51% +6.91% +150.4300 +147.2300

USD/CHF 0.8936 0.8944 -0.07% -3.34% +0.8975 +0.8896

GBP/USD 1.2563 USD 1.2500 + 0.50% + 3.88% + 1.2584 USD + 1.2447 USD

USD/CAD 1.3547 1.3591 -0.32% -0.01% +1.3668 +1.3536

AUD/USD 0.6615 USD 0.6630 -0.22% -2.95% + 0.6642 USD + 0.6573 USD

EUR/CHF 0.9846 0.9862 -0.16% -0.50% +0.9868 +0.9816

EUR/GBP 0.8769 0.8824 -0.62% -0.85% +0.8839 +0.8768

$0.6184 0.6148 +0.59% -2.61% + $0.6187 + $0.6124

dollars / dollars

Dollar / Norway 10.6650 10.6210 +0.44% +8.70% +10.7690 +10.6290

Euro / Norway 11.7497 11.7106 +0.33% +11.97% +11.8338 +11.6981

Dollar / Sweden 10.2563 10.2857 -0.46% -1.46% +10.3522 +10.2405

Euro / Sweden 11.3011 11.3530 -0.46% + 1.36% +11.3720 +11.3010

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