- U.S. CPI data weighs on dollar
- Fed's Powell affirms low-rate policy
- Sterling crosses $1.38
- Bitcoin down, consolidates recent gains
- Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
(Adds new comment, Fed's Powell comments, updates prices)
The dollar dropped to two-week lows on Wednesday in choppy trading, led by losses against sterling and the euro, weighed down by U.S. data showing tepid inflation and lower Treasury yields.
U.S. benchmark 10-year yields were last at 1.137% US10YT=RR , down about 2 basis points from Tuesday's level.
Federal Reserve Chairman Jerome Powell did not do the dollar any favors, as he struck an overall dovish tone on Wednesday and affirmed that the U.S. central bank will keep interest rates at current levels until the economy has reached maximum employment and inflation stays above 2% for some time.
The dollar extended losses after data showed underlying U.S. inflation remained benign. Excluding the volatile food and energy components, the CPI was unchanged for a second straight month.
"The dollar's gains have certainly lost momentum and the underlying trend of weakness could likely persist. Today's action really centered around the CPI," said Amo Sahota, executive director at Klarity FX in San Francisco.
"The market expected inflation to pick up a little bit and it's just benign at this point. The reflation trade is not quite there yet," Sahota added.
The dollar index =USD drifted to a two-week low of 90.249, posting its third day of losses. It last traded 0.1% lower at 90.377. Prior to this week, the dollar had gained more than 2% since the beginning of the year, as investors covered over-extended short positions on the currency.
Traditionally viewed as a safe haven, the dollar has sunk against major peers as optimism over monetary and fiscal support, robust corporate earnings and coronavirus vaccines bolstered risk sentiment.
In the cryptocurrency market, bitcoin BTC=BTSP consolidated recent gains on Wednesday, trading 2.7% lower at $45,208. It hit a new high of $48,216 on Tuesday following Tesla's disclosure of a $1.5 billion investment in the virtual currency.
Rival virtual currency ethereum, which often moves in tandem with bitcoin, reached a record $1,839 on Wednesday before pulling back slightly. It was last down 1.5 at $1,746.
Foreign exchange traders, meanwhile, have been waging a tug-of-war over the impact on the dollar of U.S. President Joe Biden's planned $1.9 trillion pandemic-related fiscal stimulus package.
On the one hand, the government expects to speed up a U.S. economic recovery, bolstering the currency. But on the other, it could heat up inflation, which would lift riskier assets at the dollar's expense.
The dollar gained 0.1% against the yen to 104.64 yen JPY=EBS . The Japanese currency earlier hit its highest against the greenback since Jan. 29.
The euro EUR=EBS edged up to $1.2126, adding to a three-day gain and hitting its highest since the start of February.
The British pound GBP=D3 set fresh three-year highs of $1.3865 and was last up 0.2% at $1.3840.
======================================================== Currency bid prices at 3:05PM (2005 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 90.3670 90.4610 -0.10% 0.429% +90.5280 +90.2490 Euro/Dollar EUR=EBS $1.2128 $1.2121 +0.06% -0.74% +$1.2144 +$1.2110 Dollar/Yen JPY=D3 104.6400 104.5700 +0.10% +1.34% +104.8350 +104.4300 Euro/Yen EURJPY= 126.90 126.70 +0.16% -0.02% +127.0800 +126.6600 Dollar/Swiss CHF=EBS 0.8897 0.8923 -0.29% +0.57% +0.8931 +0.8891 Sterling/Dollar GBP=D3 $1.3839 $1.3813 +0.20% +1.31% +$1.3865 +$1.3803 Dollar/Canadian CAD=D3 1.2688 1.2692 -0.02% -0.35% +1.2710 +1.2669 Aussie/Dollar AUD=D3 $0.7729 $0.7739 -0.11% +0.49% +$0.7756 +$0.7720 Euro/Swiss EURCHF= 1.0791 1.0813 -0.20% -0.15% +1.0819 +1.0787 Euro/Sterling EURGBP= 0.8760 0.8769 -0.10% -1.98% +0.8780 +0.8752 NZ NZD=D3 $0.7213 $0.7240 -0.37% +0.45% +$0.7244 +$0.7200 Dollar/DollarDollar/Norway NOK=D3 8.4450 8.4455 +0.14% -1.51% +8.4600 +8.4090 Euro/Norway EURNOK= 10.2440 10.2358 +0.08% -2.13% +10.2618 +10.2070 Dollar/Sweden SEK= 8.3106 8.3157 -0.04% +1.39% +8.3333 +8.2794 Euro/Sweden EURSEK= 10.0802 10.0840 -0.04% +0.04% +10.0995 +10.0430 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
