The dollar hit a six-week high against the yen and recovered from a roughly two-week low against a basket of major currencies on Tuesday as data for January showing the smallest annual increase in U.S. consumer prices since October 2021 did not alter market expectations that interest rates will remain elevated for some time.<\/p>\n
The greenback initially fell across the board following the inflation report, but regained its footing as U.S. Treasury yields rose as well.<\/p>\n
The Labor Department’s Consumer Price Index increased 0.5% last month after gaining 0.1% in December, data showed. Monthly inflation was boosted in part by rising gasoline prices, which increased 3.6% in January.<\/p>\n
But in the 12 months through January, the CPI grew 6.4%, the smallest gain in about 1-1\/2 years, and followed a 6.5% rise in December. January’s annual CPI rate though was higher than market forecasts for a 6.2% gain.<\/p>\n
“Month-over-month as expected, but upward revisions for last month brought year-over-year numbers above expectations. This should keep the U.S. dollar strong,” said Athanasios Vamvakidis, global head of G10 FX strategy, at Bank of America (NYSE:BAC<\/a><\/span>) in London.<\/p>\n “Inflation in the U.S. is clearly sticky. This will keep the Fed policies on track, keeping the U.S. dollar strong – not necessarily stronger. The big picture is that the inflation data clearly show that the market is too optimistic about inflation dropping enough this year to allow the Fed to start cutting rates.”<\/p>\n In late afternoon trading, the dollar rose 0.5% against the yen to 133.035 yen, after earlier hitting a six-week peak of 133.305 yen.<\/p>\n