(Updated at 1020 EST/1520 GMT)
The dollar jumped against the euro and hit a one-month high against the yen on Thursday after data showed that U.S. consumer price inflation came in above economists' expectations in December, raising some doubts that the Federal Reserve will cut rates as soon as traders expect.
Bitcoin also surged to a two-year high as several exchange-traded funds (ETFs) tied to the spot price of the cryptocurrency began trading.
The headline U.S. Consumer Price Index (CPI) rose 0.3% last month, for an annual gain of 3.4%, against expectations of 0.2% and 3.2%, respectively.
In particular, prices rose more than expected as rents maintained their upward trend.
“The details of the report will give dovish Fed officials pause," said Adam Button, chief currency analyst at ForexLive in Toronto.
Traders are pricing in aggressive expectations for rate cuts this year, with the Fed seen as beginning to cut rates in March.
But “today's CPI report suggests that the Fed's initial rate cut may be later than the market is hoping for," said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
Traders expect the U.S. central bank to ease monetary conditions as the U.S. economy weakens and inflation moves back closer to the Fed's 2% annual target.
But that may not occur as quickly as some expect. "The question everyone is struggling with is what kind of inflation regime we are in - are we still in a 2010s era of low growth, low inflation and we’re still just working through the end of the pandemic adjustment and then we’re back into that?" Button said.
"Obviously that's what the market’s been betting on for the last two months. And I think it's ultimately right, but getting there might not be as quick as anyone would like,” he added.
The dollar index =USD was last up 0.26% on the day at 102.61. It had traded at around 102.20 before the data was released.
The euro EUR=EBS dipped 0.24% on the day to $1.09450. The greenback gained 0.12% to 145.95 yen JPY=EBS , after earlier reaching 146.10, the highest since Dec. 11.
In cryptocurrencies, Bitcoin BTC= reached $49,051, the highest since December 2021, and was last up 3.85% at $47,726.
The U.S. Securities and Exchange Commission on Wednesday gave the green light to offer ETFs linked to bitcoin.
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