Dollar rises as hot U.S. inflation data seen keeping Fed hawkish By Reuters


© Reuters. FILE PHOTO: U.S. hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won/File Photo

The dollar rose to a four-week high against a broad basket of currencies on Friday after data showed that consumer prices in the United States rose more than expected in May. The data reinforced expectations that the Federal Reserve will continue raising interest rates.

The consumer price index rose by 8.6% in May, which was higher than the 8.3% increase in April. Economists had expected the annual rate to have peaked in April.

The data was released ahead of the release of the Federal Reserve’s monetary policy meeting on July 18-19. It is widely expected that the central bank will raise its key interest rate by another 50 basis points. Since March, the Fed has raised its overnight rate by 75 basis points.

Despite the increase in consumer prices, inflation is still at a 40-year high. According to John Doyle, a vice president at Monex USA, there is still a lot of doubt as to when it will start to decline.

The stock market is reacting to the data by extending its losses, as investors expect the Fed to accelerate its rate-hike plans. The dollar is also gaining on the risk-off trading that occurred after the data.

The dollar index, which measures the strength of the US dollar against other currencies, was up 0.8% at 104.16, its highest level in almost two weeks. It is also within sight of its two-decade high of 105.01, which was reached in May.

For the week, the dollar index rose by over 2%. It was up against the Swiss franc on Friday after the US Treasury Department said that Switzerland continues to exceed the thresholds that it must meet in order to be considered a currency manipulator. Despite this, the department did not label the country a currency manipulator.

The Australian dollar fell against the dollar on Friday after the consumer price index data in the US gave investors a reason to sell the risk-sensitive assets.

The pound fell against the dollar on Friday as investors remained concerned about the UK’s economic outlook. It was trading at $1.2315, which was its lowest level in almost two weeks.

Bitcoin was down 3.7% on Friday as it continued to face selling pressure. It has been trading around $30,000 since the start of June, and this level has been the target of selling pressure.