Singapore, Dec 12 (BNA): The dollar stabilized after data showed producer prices in the US rose more-than-expected last month, indicating persistent inflationary pressures and fueling fears that the Federal Reserve may need to keep interest rates higher for longer.
Data released on Friday showed that the US producer price index for final demand rose 0.3% in November and 7.4% year-on-year, a slight surprise from expectations for an increase of 0.2% and 7.2%, respectively.
The pound sterling fell 0.27 percent to $1.22335 in early Asian trading, while the Australian dollar fell 0.34 percent to $0.6773, according to Reuters.
The kiwi fell 0.37% to $0.6391.
“There was a bit of a concern about how inflation will continue to rise and will encourage the Fed to keep policy at a constrained level for longer than previously expected,” said Carol Kong, currency analyst at the Commonwealth Bank of Australia (CBA). .
Traders have also been on guard in the run-up to major risk events this week, including a slew of key central bank meetings.
The Fed is taking center stage again, and is widely expected to raise interest rates by 50 basis points, though the focus is on the central bank’s updated economic outlook and Fed Chairman Jerome Powell’s press conference.
“If he talks more about the risks to the economy, I think the markets will probably see him as pessimistic, and of course, the markets like the dovish comments and how the FOMC will pay more attention to the downside risks to the economy,” CBA’s Kong said. .
The Bank of England and the European Central Bank (ECB) also meet this week and each is also expected to raise interest rates by 50 basis points.
“We have been told by ECB officials that they care more about core inflation, which has remained high,” Kong said of the upcoming ECB meeting.
“If they raise 50 basis points, they may follow up with some hawkish comments at the Lagarde conference after the meeting.”
The euro was last down 0.1 percent at $1.0520.
Elsewhere, the dollar rose 0.12% against the Japanese yen to 136.73, and against a basket of currencies, the US dollar index gained 0.04%, at 105.09.
The offshore yuan rose marginally to 6.9730 per dollar.
Ahead of the FOMC meeting, US inflation data for November is due on Tuesday, with economists expecting core inflation to rise 6.1% year-on-year.
“The market reaction to US inflation surprises has been uneven so far in 2022, with negative surprises having a greater impact than bullish ones,” said Barclays analysts.
“Inflation data is likely to be the bigger driver of the two, (given) the Fed’s guidance toward smaller increases,” they added, referring to the US dollar.
FAE