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Forex News: U.S. Dollar Higher On Rate Hike Hopes

U.S. Dollar Higher On Rate Hike Hopes

05/13/2021 - 07:25:00 (RTTNews)

(RTTNews) - The U.S. dollar spiked higher against its most major counterparts in the European session on Thursday, as higher-than-expected U.S. inflation in April fueled speculations that the Fed might resort to tightening of monetary policy sooner than expected.

Overnight data showed that the U.S. annual inflation rate jumped to the highest in 13 years and well above forecasts, while the monthly gauge rose the most since 2009.

Expectations for a Fed rate hike have been pushed forward, with investors pricing in an 80 percent chance of an increase as early as December next year.

Although the Fed has played down the risk of inflation, investors fear that persistent inflationary pressures could force it to tighten policy sooner than thought.

Fed vice chair Richard Clarida said on Wednesday that the recent rise in prices could be temporary and it has not changed the central bank's stance of keeping monetary policy loose.

Investors await the producer price index and initial jobless claims data due later in the day for more direction.

The greenback rebounded to 0.9092 against the franc, from a low of 0.9066 seen at 3:15 am ET. Should the greenback strengthens further, it is likely to test resistance around the 0.92 region.

The greenback appreciated to a 3-day high of 1.4006 against the pound and a 1-week high of 1.2051 against the euro, after declining to 1.4078 and 1.2106, respectively in early deals. Next key resistance for the greenback is likely seen around 1.37 against the pound and 1.18 against the euro.

The greenback rose to a 6-day high of 1.2157 against the loonie and 9-day highs of 0.7688 against the aussie and 0.7135 against the kiwi, up from its prior lows of 1.2104, 0.7748 and 0.7179, respectively. The greenback is seen finding resistance around 1.25 against the loonie, 0.75 against the aussie and 0.70 against the kiwi.

On the other hand, the greenback reversed from an early near a 5-week high of 109.79 against the yen, with the pair trading at 109.62. If the greenback falls further, it is likely to test support around the 108.00 region.

Data from the Ministry of Finance showed that Japan posted a current account surplus of 2,650.1 billion yen in March- up 37.3 percent on year.

That missed expectations for a surplus of 2,796.2 billion yen and was down from 2,916.9 billion yen in February.

The U.S. weekly jobless claims for the week ended May 8 and PPI for April will be featured in the New York session.

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