Dollar Strengthens as Analysts Expect Further Rise in U.S. Inflation Numbers

The U.S. dollar index appreciated against the basket of major currencies on Monday (April 11), helped by a rise in U.S. Treasury note yields, including predictions that the Federal Reserve (Fed) will accelerate interest rate hikes to curb inflation.

  • The dollar index, which measures the dollar’s movements against six major currencies in a basket of currencies, was up 0.14% at 99.9330.
  • The U.S. dollar strengthened against the yen at 125.45 yen from 124.36 yen.
  • The dollar was higher against the Canadian dollar at 1.2621 Canadian dollars from 1.2567 Canadian dollars.
  • The U.S. dollar was lower against the Swiss franc to 0.9311 francs from 0.9335 francs.
  • The euro strengthened against the US dollar at $1.0893 from $1.0886.
  • The pound fell to $1.3034 from $1.3038.
  • The Australian dollar weakened to $0.7431 from $0.462.

The yield on the 10-year U.S. Treasury bond rose above 2.79% overnight, reaching its highest level since January 2019 amid forecasts that the Fed will accelerate rate hikes.

The investor focus is on US inflation this week. The U.S. Department of Labor will release today’s Consumer Price Index (CPI). The Producer Price Index (PPI), will be released on Wednesday. Analysts expect both CPI and PPI to continue to rise.

In February, the U.S. CPI was up 7.9% year over year, the highest level since January 1982.

The PPI rose 10% in February from a year earlier.

Analysts expect the consumer price index to rise by 8.5% year-on-year in March, which would be the highest level since 1981. For the PPI, the analysts expect an increase of 10.6%.

If inflation meets or even exceeds analysts’ expectations, the probability that the Fed will raise interest rates will increase, as was already evident from the meeting minutes of the last FOMC meeting. Various Fed officials, including Vice-Chair of the Federal Reserve Lael Brainard, see the return to price stability as a top priority and would therefore welcome this move.

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