Dollar Retreats After U.S. Inflation Rise

The U.S. dollar pulled back in Thursday trading after reaching its highest level in 18 months. Meanwhile, Treasury yields fell, and investors awaited fresh U.S. inflation and economic data.

The US dollar retreated on Thursday after hitting an 18-month high. At the same time, the yield of treasury bonds decreased and the investors were waiting for the new inflation and economic data of the United States.

According to Mehr reporter, the dollar index, which measures the value of this currency against a basket of major currencies, reached 102.06 units with a decrease of 0.1 percent. This index had reached the highest level in 18 months after the publication of the US inflation statistics on Wednesday, but then lost most of its growth.

According to Reuters, in the foreign exchange market, the euro gained 0.3% to one dollar and 11 cents, and the British pound was traded at the level of one dollar and 32 cents with a growth of 0.2%.

Data from the US Department of Labor showed that the core consumer price index in September increased by 0.3% compared to the previous month; A figure that was higher than the forecast of 0.2 percent by economists. Despite this, comments by Federal Reserve officials about the need for caution in monetary decisions led traders to reduce the likelihood of an interest rate hike this month.

The importance of these developments is that an increase in the US interest rate can strengthen the demand for the dollar, usually by raising the yield of dollar-denominated assets. On the other hand, a reduction in expectations of a contractionary monetary policy may erode some of this advantage.

In addition to inflation data, investors are now looking at US producer price and retail sales data to get a clearer picture of the state of demand and the likely path of monetary policy.

The developments of the currency market show that even the release of higher-than-expected inflation data does not necessarily lead to a sustained strengthening of the dollar; Because the market's reaction depends on the interest rate outlook and the traders' assessment of the future decisions of the central bank.