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Title: Dollar holds steady ahead of expected red-hot U.S. inflation data

Apr 12, 2022 01:50AM ET

By: AnalysisWatch

The dollar index strengthened Tuesday thanks to strong U.S. yields ahead of inflation data expected to show that U.S. prices rose the most in more than 16 years, reinforcing expectations of aggressive Fed policy tightening.

The index jumped to 100.13, breaking last week's two-year peak of 100.19, before settling just below 100.

The recent strengthening of the dollar against the yen (JPY) was particularly notable. The U.S. currency was volatile Tuesday, trading at 125.22 yen, within striking distance of a daily high of 125.77, which was close to the June 2015 high of 125.86 yen. A rise above that level would take the dollar to its strongest level against the yen since 2002.

The dollar also rose significantly against the Chinese overseas yuan (CNH) overnight, hitting a two-week high of 6,390 in early trading before declining again.

The dollar's rise "was most pronounced against the yen and CNH, the currencies of dovish central banks," CBA analysts said in a note this morning.

According to a Reuters poll of economists, U.S. consumer prices in March probably rose the most in 16.5 years as the war in Ukraine drove gasoline prices to record highs.

Meanwhile, long-term U.S. yields rose slightly, though the gains were more modest than in recent days.

The euro failed to sustain a modest recovery Monday after French leader Emmanuel Macron defeated far-right challenger Marine Le Pen in the first round of the presidential election.

The euro last traded at $1.0877, little changed from Friday's close.

The Australian dollar settled at $0.7425 after four consecutive drops as weak oil prices put pressure on the commodity-linked currency.

The New Zealand dollar was unchanged at $0.6828 ahead of an expected meeting of the Reserve Bank of New Zealand, which is expected to raise interest rates by 50 basis points.

The pound was trading at $1.30245.

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