Tom Westbrook

SYDNEY – After data showing that U.S. consumer price rose at the fastest pace in almost 40 years, but not worrying enough for a change of outlook, dollar dropped below support levels.

The dollar fell 0.6% overnight against the euro to $1.1453, after a few months of tight trading. This is its lowest level since mid-November. Chart resistance is not significant and further losses are unlikely until $1.1525 In Asia, it remained at $1.1443

Also, it fell 0.6% against the Japanese yen. It dropped through support of 115, to reach 114.38 Yuan per Dollar, an increase of more than 2 weeks. On Thursday, it last purchased 114.63 Yuan.

Risk-sensitive currencies benefited. Australian dollars rose by more than 1% in October. This was its highest percentage gain since October. It also surpassed its 50-day average and reached a nearly two-month high of $0.72922. [AUD/]

The monthly U.S. inflation numbers were only a fraction lower than expected and the year-on-year increase in CPI at 7% was the largest since June 1982.

The Federal Reserve already indicated higher interest rates and a shrinking reserve to limit it. Fed funds futures price in three rate hikes for 2022. Some dollar longs began bailing out because so much of the current market is priced in.

Jan Nevruzi of NatWest Markets, a strategist in the sector, said that “I don’t believe it was anything within CPI that caused market to take an exhale of relief.”

“A few tenths to basis points of difference on either end of consensus carries an much lower significance when CPI is running at 1/3 of the current pace,” he said. “Would a 6.7% or 7.3% print really have changed the Fed’s trajectory in the next few months or this year – I do not think so.”

New Zealand’s dollar rose 0.9% in the Asia session, after the U.S. Inflation Print. It was also testing its 50-day moving mean at $0.6853.

Sterling has rallied as traders believe Britain’s economy will survive an increase in COVID-19 case numbers. The Bank of England, who is expected to start rate increases as soon as next month and is testing its 200 day moving average of $1.3708, is currently testing the currency.

The December lows are up by 4% and traders seem to have gotten over a political crisis that engulfed Prime Minister Boris Johnson, who apologized for going to a Downing Street party during Britain’s first coronavirus outbreak.

In three weeks, the Canadian dollar also rose more than 3.5%. This is as oil prices rise and investors consider the possible economic consequences of Omicron. At 94.991, the Canadian dollar is at an all-time low of 94.991, which is close to a two month high.

Tomorrow, Fed Governor Lael brainard is expected to appear in Congress as part of a hearing regarding her nomination as deputy chairman. The Fed’s first meeting for the year will be held within two weeks.

Joe Capurso from the Commonwealth Bank of Australia stated that “The dollar does NOT have to go up because the Fed will tighten its cycle.”

“It’s not an equation where Fed hikes equal dollar increases. Counter-cyclical currencies like the dollar decrease when the world economy is recovering.

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Exchange bid prices starting at 0107 GMT

Description: RIC U.S. Last Close Pct. Change YTD High Bid Low

Previous changes

Session

Euro/Dollar

$1.1442 $1.1441 +0.01% +0.65% +1.1448 +1.1440

Dollar/Yen

114.6250 114.5650 +0.00% -0.40% +114.7000 +0.0000

Euro/Yen

131.14 131.14 +0.00% +0.63% +131.2400 +131.1300

Dollar/Swiss

0.9144 0.9141 +0.04% +0.26% +0.9145 +0.9138

Sterling/Dollar

1.3707 1.3705 +0.03% +1.37% +1.3712 +1.3698

Dollar/Canadian

1.2505 1.2506 -0.01% -1.10% +1.2509 +1.2498

Aussie/Dollar

0.7283 0.7284 -0.02% +0.19% +0.7288 +0.7278

NZ

Dollar/Dollar 0.6851 0.6849 +0.09% +0.16% +0.6857 +0.6844

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