The US Dollar Rises As Investors Consider Inflation

(CTN News) – The dollar (USD) rose on Friday as traders weighed ambiguous U.S. inflation data and tensions in the Middle East, where the U.S. and Britain attacked Houthi targets.

The U.S. dollar index, which measures the currency against six major peers, increased 0.26% to 102.48 on Friday. After falling 2% in 2023, it has risen around 1.1% this month due to stronger-than-expected U.S. data.

In December, U.S. consumer prices rose 0.3% despite higher rents, contrary to economists’ expectations of 0.2% and 3.2%. After the data, the dollar rose, but the day ended roughly flat.

On Friday, the EUR/USD traded at $1.0949, down 0.2%. Compared to last year, it is down 0.8% this year.

The CME Group’s Fed Watch Tool shows 68% odds of the Fed’s first 25 basis-point cut occurring in March, up from 65% on Thursday.

At the moment, there are conflicting forces driving asset allocation, says Carl Hammer, head of asset allocation at SEB Asset Management. “As a house, we expect risk appetite to do fairly well… but ultimately we think the dollar will weaken.”

Even so, the U.S. is clearly doing better than Europe and China. As a result, I believe that we are stuck around the $1.10 handle in euro/dollar.”

A widening of the fallout from the Israel-Hamas war in Gaza was keeping investors’ attention in the Middle East where the U.S. and UK struck Houthi targets.

Although the reaction in currency markets was muted, oil prices rose by 3.9% to $80.45 a barrel.

The dollar was unchanged against Japan’s yen, which is traditionally a safe-haven currency, at 145.24 yen. Another safe-haven currency, the Swiss franc, lost around 0.17 percent.

There was a 0.25% decline in sterling to $1.273. Although November’s growth was better than expected, it remained subdued over the last three months.

Among cryptocurrencies, bitcoin stood mostly unchanged at $45,965 after surging to a two-year high overnight after the Securities and Exchange Commission approved bitcoin ETFs on Wednesday.

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