Dollar strengthened ahead of the U.S. inflation figures

The dollar strengthened to a two-week high against a basket of its rivals, as the market is waiting for the U.S. inflation figures.

The dollar strengthened to a two-week high against a basket of its rivals, as the market is waiting for the U.S. inflation figures. The rise came as market expectation rises that the Federal Reserve could taper its stimulus earlier than anticipated despite a surge in COVID-19 infections.

The U.S. dollar index increased 0.3% to settle at 92.880, its highest level since August 27. Notably, it was last traded up 0.2%.

Furthermore, U.S. economic data will be announced this week, starting with U.S. consumer price data on September 14. It will give a broad view of the economy’s progress ahead of the Fed’s meeting, due next week.

Patrick Harker, the Philadelphia Federal Reserve President, became the latest official to announce he wants the central bank to begin tapering in 2021. Harker reported that he was enthusiastic about scaling back asset purchases.

According to FX analysts at MUFG, the U.S. dollar’s recent recovery has coincided with more hawkish comments from Fed Presidents.

Federal Reserve officials are likely to start paring bond purchases in November

On September 10, the Wall Street Journal reported that Fed officials will try to agree to start paring bond purchases in November.

Additionally, retail sales and productions figures are also due later this week.

The euro witnessed slump against the dollar. It declined by 0.3% to $1.17750, its lowest level in more than two weeks. The fall came as European Central Bank announced last week it would begin to trim its own emergency bond purchases.

Meanwhile, risk-sensitive currency, the Australian dollar, fell 0.2% at $0.7337.  It has struggled to hold over $0.74. Besides, its New Zealand counterpart, the New Zealand dollar, declined by 0.4% at $0.71 as a lockdown of Auckland was extended until midnight on September 21.

Moreover, core consumer price inflation is anticipated to slow a tad to 4.2%. Significantly, the 10-year yield was last stood at 1.3326%.

Chinese economic data, retail sales are due on Wednesday. It is likely to further add to concerns about the world’s second-largest economy. The Chinese yuan dipped slightly to 6.4550 per dollar.

Moreover, the British pound dropped by 0.1% against the dollar to settle at $1.3816. 

Cryptocurrencies were also under pressure. The most popular cryptocurrency, Bitcoin, declined by 3% to trade at $44,637. The digital coin has struggled to find support above its 20-day and 200-day moving averages.