The US dollar rose modestly on Wednesday morning after a measure of inflation excluding energy prices rose, prompting the greenback to reverse the prior day's pullback. The Labour Department reported that its Consumer Price Index was unchanged for the third straight month in January, held down by cheaper gasoline.
But excluding the volatile food and energy components, the CPI gained 0.2 percent, rising by the same margin for a fifth straight month. In the latest 12-month period, the so-called core CPI rose 2.2 percent for a third straight month. Evidence of inflation can increase the value of the dollar by raising expectations that the Federal Reserve will tighten monetary policy.
The dollar fell on Tuesday as investors put money in riskier assets on rising hopes of a breakthrough in US-China trade talks. It had gained for eight consecutive sessions at the end of Monday, the most since February 2017. Risk appetite remained elevated on Wednesday, yet the morning's inflation print nevertheless kept the safe-haven dollar elevated. Jane Foley, currencies strategist at Rabobank, cautioned that there was "a lot of evidence that global growth is slowing and a lot of evidence to be suspicious of an end to the US-China trade war."
"There will still be a long way to go," she added.
The dollar index rose by 0.16 percent to 96.863. It stood at $1.130 against the euro, slightly firmer.
The New Zealand dollar and Sweden's crown rose after their central banks broke with the growing caution of the world's major monetary-policy makers, surprising traders who had expected more dovish signals.
The kiwi was last up 1.37 percent to $0.683 as traders rushed to cover short positions. Sweden's crown rose 0.73 percent against the euro to 10.41 and 0.48 percent versus the dollar to 9.215.
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