Dollar loses ground after U.S. inflation data

FILE PHOTO: A U.S. one dollar banknote is seen in this illustration taken November 23, 2021. REUTERS/Murad Sezer/Illustration/File Photo

By Sinéad Carew

(Reuters) - The dollar lost some ground on Friday after U.S. consumer prices increased roughly in line with expectations in November as investors, who had been bracing for much higher inflation, bet that the actual number would not change the pace of interest rate hikes.

Labor Department data showed an increasing consumer price index (CPI) as cost of goods and services rose broadly amid supply constraints for the largest annual gain since 1982.

The CPI rose 0.8% last month after surging 0.9% in October while in the 12 months through November, it rose 6.8%, following a 6.2% advance in October. this compared with a 0.7% forecast from economists polled by Reuters.

"I'd characterize the CPI reading as right on expectations but the Forex market had positioned for a higher reading," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

"The FX market has been extremely long US dollars for several months so with this number coming in benign we're almost out of events that could push the dollar materially higher before year-end," he said, noting that next week's FOMC meeting and Powell's speech following the meeting are likely the last dollar catalyst events this year.

"Normally FX investors scale back positions for year end ...

today's proce action where the dollar fell on neutral news is probably a prelude to that," Anderson said.

Against a basket of its rivals, the dollar went into negative territory after the news and while it regained enough ground to turn positive it was still below its pre-CPI level. the index was last up 0.04% at 96.233.

Sterling gained some ground agaist the dollar after the day before paring gains to last trade down 0.09% at $1.3210.

The euro was down 0.04% at $1.1289.

Elsewhere, China's yuan fell in onshore and offshore markets after the People's Bank of China (PBOC) raised FX reserve requirements for the second time since June, and was further pressured when the central bank set its trading band midpoint weaker than expected.

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Currency bid prices at 10:00AM (1500 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 96.2330 96.2120 +0.04% 6.948% +96.4290 +96.1000

Euro/Dollar $1.1289 $1.1294 -0.04% -7.61% +$1.1310 +$1.1266

Dollar/Yen 113.3700 113.4600 -0.06% +9.74% +113.7900 +113.3400

Euro/Yen 127.97 128.14 -0.13% +0.83% +128.4000 +127.8200

Dollar/Swiss 0.9224 0.9237 -0.10% +4.30% +0.9252 +0.9222

Sterling/Dollar $1.3210 $1.3222 -0.09% -3.31% +$1.3242 +$1.3188

Dollar/Canadian 1.2719 1.2714 +0.05% -0.11% +1.2739 +1.2680

Aussie/Dollar $0.7162 $0.7148 +0.17% -6.92% +$0.7182 +$0.7132

Euro/Swiss 1.0411 1.0429 -0.17% -3.66% +1.0447 +1.0410

Euro/Sterling 0.8543 0.8541 +0.02% -4.41% +0.8551 +0.8530

NZ $0.6783 $0.6792 -0.15% -5.57% +$0.6806 +$0.6771

Dollar/Dollar

Dollar/Norway 8.9850 8.9965 -0.02% +4.75% +9.0065 +8.9485

Euro/Norway 10.1430 10.1513 -0.08% -3.10% +10.1757 +10.1116

Dollar/Sweden 9.0789 9.0527 +0.20% +10.77% +9.0982 +9.0490

Euro/Sweden 10.2497 10.2290 +0.20% +1.72% +10.2549 +10.2219

(Reporting by Sinéad Carew in New York, Tommy Wilkes and Saikat Chatterjee in London; Editing by Krishna Chandra, John Stonestreet and Angus MacSwan)

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