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Dollar dips before U.S. inflation data

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NEW YORK (Reuters) – The dollar index dipped in choppy trading on Tuesday as investors awaited data on Wednesday that will be the next major indicator of whether rising price pressures are accelerating.

U.S. producer prices increased solidly in October, data showed on Tuesday, indicating that high inflation could persist for a while amid tight supply chains related to the pandemic.

But traders were holding back on big moves ahead of consumer price index data due on Wednesday morning.

“Looking for any sort of major moves ahead of the U.S. CPI tomorrow is going to be futile. We will likely see a little bit more movement on the FX side of things after CPI,” said Mazen Issa, senior FX strategist at TD Securities.

He expects “a stronger print than consensus on what is already expected to be a fairly hot CPI print.”

Economists polled by Reuters see monthly CPI accelerating to 0.4% from the previous month’s 0.2% rise, with the closely watched year-on-year core measure gaining 0.3 percentage point to 4.3%, well above the Fed’s average annual 2% inflation target.

Fed officials on Tuesday said it is not clear that high inflation will become more entrenched than previously expected.

San Francisco Fed President Mary Daly said it will be mid-2022 before there is more clarity on the employment and inflation outlook and Minneapolis Fed President Neel Kashkari said he believes the forces that are currently keeping people out of the labor market and pushing up prices will prove to be temporary.

The dollar index dipped 0.11% to 92.948 while the euro gained 0.07% to $1.1594.

Elsewhere, the yen reached a one-month high of 112.73 against the greenback and last traded at 112.83.

Sterling, hammered last week in the wake of the Bank of England’s surprise decision to keep rates on hold, was little changed on the day at $1.3561.

The New Zealand dollar dipped 0.51% to $0.7132 after jumping on Monday. It has been drawing support from expectations that the Reserve Bank of New Zealand could raise rates by as much as 50 basis points later this month.

The risk-sensitive Australian dollar dropped 0.60% to trade at $0.7378.

Bitcoin rose to a record $68,564 before reversing course. It was last down 1.15% at $66,791. Ether hit a record high of $4,843.

Reporting by Sinéad Carew in New York; Additonal reporting by Stephen Culp and Karen Brettell in New York; Editing by Emelia Sithole-Matarise, Bernadette Baum, Jan Harvey and Dan Greber

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