Dollar rises against euro and Swiss franc after US inflation data

Dollar gains against euro, Swiss franc as US inflation data rises

NEW YORK, Sept 11 : The U.S. dollar climbed in value against the euro and Swiss franc on Friday, following an increase in US consumer prices, prompting expectations that the Federal Reserve would lift interest rates next week. Initially, the dollar rose following the release of the data. However, investor confidence remained uncertain as tensions in the Iran conflict led to higher oil prices, which capped the greenback's progress and left it nearly unchanged against its counterparts.

The Labor Department reported that the US Consumer Price Index rose by 0.4% in August, compared to 0.1% in July. Core CPI also increased by 2.4% year-on-year in August, up from 2.5% in July. The euro decreased by 0.13% to $1.15950 and was on track for a weekly decline. The dollar increased by 0.47% to 0.817 against the franc, poised for its third consecutive weekly gain against the Swiss currency.

Juan Perez, director of trading at MonexUSA, noted that the key factor to watch is core CPI, which appears to be accelerating. This trend tends to boost the US dollar's value against other currencies and increases the likelihood of a Federal Reserve interest rate hike during their upcoming meeting. Markets now estimate an 86% probability of a 25 basis-point increase, up from 72% the previous day, according to the CME's FedWatch tool.

U.S. Treasury yields stayed close to their multi-year peaks, with the 2-year yield, which typically moves in tandem with Fed rate expectations, rising 7.75 basis points to 4.63%. Despite the recent drop, oil prices remained above $100 a barrel, while diesel prices hit record highs, indicating that inflation is likely to continue and spread.

Brent crude oil prices fell by 2.81% to $104.61 a barrel. The dollar index, which tracks the greenback against a basket of currencies including the yen and the euro, remained steady at 99.12, marking its second weekly loss. Meanwhile, the yen was set for a second consecutive weekly gain against the US dollar, gaining 0.45% to 153.69 per dollar.

The Bank of Japan is expected to raise interest rates next week, potentially signaling a quicker pace of future tightening if persistent price pressures risk inflation surpassing its target, according to four sources familiar with the central bank's plans.