Hot Inflation Data Supports the US Dollar

The US dollar gained strength versus its major peers in the New York session on Tuesday. At the same time, consumer inflation in the United States unexpectedly climbed in August, reinforcing predictions that the Federal Reserve will maintain its 75 basis-point rate hike this month.

The consumer price index increased by 0.12 percent in August after remaining steady in July. Consumer prices were predicted to fall by 0.1 percent, according to economists.

Consumer prices rose 8.35 percent in August compared to the same month a year ago, slowing from the 8.5 percent increase in July. Economists predicted that yearly growth would fall to 8.12 percent.

Core consumer price rise rose to 6.32 percent in August, up from 5.92 percent in July. Analysts predicted the yearly growth rate to increase to 6.11 percent.

The USD/CAD pair reached a 5-day high of 1.3124 after falling to a 2-week low of 1.2954. The US dollar was trading at 1.2987 to the Canadian dollar at yesterday’s end. If the greenback’s advance continues, it may encounter resistance near 1.35.

Rupee Rises Against US Dollar

The rupee gained 36 paise against the US dollar on Tuesday, reflecting the currency’s drop against its major peers and foreign money inflows.

The rupee opened at 79.35 versus the dollar on the interbank exchange market. During the session, it hit an intraday high of 79.05 and a low of 79.33. It eventually closed at 79.18, up 36 cents from the previous close of 79.52.

The dollar, which measures the strength of the greenback against a basket of six currencies, dropped 0.40 percent to 107.87.

In the run-up to the CPI report, the dollar index fell for the third straight day, the longest losing streak in a month.

Due to Tuesday, market participants pricing in the US consumer price data will suggest that inflation is nearing a high, threatening the dollar’s dominance story.