Dollar Loses Ground Against Major Rivals After Inflation Data

Dollar Loses Ground Against Major Rivals After Inflation Data

The U.S. dollar shed ground against most of its major rivals on Wednesday after data showed a sharper than expected acceleration in U.S. consumer price inflation in the month of September.

Data released by the Labor Department this morning showed that the consumer price index climbed 0.4% in September after rising by 0.3% in August. Economists had been expecting another 0.3% increase.

Excluding food and energy prices, core consumer prices edged up by 0.2% in September after inching up by 0.1% in August. The uptick in core prices matched economist estimates.

The report showed the annual rate of growth in consumer prices accelerated to 5.4% in September from 5.3% in August, while the annual rate of growth in core prices was unchanged at 4%.

The Federal Reserve’s minutes of its September monetary policy has shed some additional light on the central bank’s assessment that a moderation in the pace of asset purchases may “soon be warranted.”

The minutes revealed participants generally agreed that a gradual tapering of asset purchases that concludes around the middle of next year would likely be appropriate if the economic recovery remained broadly on track.

Participants noted that if a decision to begin tapering purchases occurred at the Fed’s next meeting in early November, the process of tapering could begin with the monthly purchase calendars beginning in either mid-November or mid-December.

The meeting also included a discussion on how slowing the current rate of bond purchases of $120 billion per month might proceed.

The dollar index dropped to 94.02, down more than 0.52% from the previous close.

Against the Euro, the dollar drifted down to $1.1594 from Tuesday’s close of $1.1532. Eurostat data released earlier in the day showed Eurozone industrial output declined for the first time in three months in August, dropping 1.6% month-on-month, reversing a 1.4% rise in July.

The Pound Sterling firmed to $1.3664 a unit, rising from $1.3588, as strong U.K. GDP data for August intensified hopes for a rate hike by the Bank of England before the end of the year.

Data from the Office for National Statistics showed that the UK’s gross domestic product grew 0.4% on month in August, but slightly slower than the economists’ forecast of 0.5%.

The Yen strengthened to 113.29 a dollar, gaining from 113.61.

Against the Aussie, the dollar eased to 0.7383 from 0.7351.

The Swiss franc strengthened to 0.9236 a dollar from 0.9307, while the Loonie climbed more than 0.2% at 1.2443 against the U.S. dollar.