FOREX-Dollar pulls back from one-year high after inflation data

Reuters

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    * Headline CPI comes in slightly above expectations
    * Fed's September meeting minutes point to possible November
taper
    * Dollar dips from fresh nearly 3-year high versus yen

 (Adds analyst comments, updates prices)
    By John McCrank
    NEW YORK Oct 13 (Reuters) - The dollar fell from its
one-year high on Wednesday as longer-dated Treasury yields
dipped after U.S. inflation data showed prices rose solidly last
month, while the minutes from the Federal Reserve's September
meeting confirm tapering will begin "soon."   
    The consumer price index rose 0.4% last month versus a 0.3%
rise anticipated by economists polled by Reuters.
Year-over-year, the CPI increased 5.4%, up from 5.3% in August.
Excluding the volatile food and energy components, the so-called
core CPI climbed 0.2% last month versus 0.1% in August.
 urn:newsml:reuters.com:*:nL1N2R81XK
    Yields on shorter-term Treasuries, which typically move in
tandem with interest rate expectations, increased after the
report, while longer-dated yields dipped, indicating the market
is still not pricing in a sustained period of inflation.  US/ 
    The gap between the two- and 10-year Treasury notes
 US2US10=RR  closed to its narrowest in two weeks after having
widened to a 3-1/2-month high on Friday.  urn:newsml:reuters.com:*:nL1N2R91GZ
    "The market is now seeing a major pivot here as far as how
inflation is showing more signs of being persistent than
transitory, and that's likely to force the Fed's hand to deliver
a rate hike well in advance of what people were anticipating,"
said Edward Moya, senior market analyst at Oanda.
    The market had been pricing in a rate hike for December
2022, but now it is eyeing September of that year, he said.
    The greenback initially moved higher after the CPI data,
touching a nearly three-year high versus the Japanese yen
 JPY=EBS , before edging lower along with the longer-dated bond
yields.
    The dollar index  =USD , which measures the greenback
against six rivals, was last down 0.515% at 94.036 from Tuesday,
when it touched 94.563, its highest since late September 2020.  
    "The dollar has had a significant move higher and it's been
ripe for a pullback here, and I think this is going to likely
trigger that," Moya said.
    The dollar slid 0.29% versus the yen to 113.275 yen.
    The euro  EUR=EBS  was up 0.56% at $1.15945, rebounding from
its nearly 15-month low of $1.1522 hit in the previous session.
    A surge in energy prices has added to inflation concerns and
stoked bets the Fed may need to act faster to normalize policy
than previously projected.
    The commodity-linked Aussie dollar  AUD=D3  rose 0.35% to
$0.7370, close to its one-month high of $0.7384 hit on Tuesday.
    The minutes from the Fed's September policy meeting signaled
that the central bankers could start tapering their crisis-era
support for the economy in mid-November, though they remain
divided over how much of a threat high inflation poses and how
soon they may need to raise interest rates in response.
 urn:newsml:reuters.com:*:nL1N2R91NQ
    "Tapering is baked in the cake," said Kathy Bostjancic,
chief U.S. financial economist at Oxford Economics.
    "The bigger question is will the inflation dynamics lead
them to be more aggressive and quicker in raising interest
rates? So interest liftoff now becomes the big focus for the
markets, and that's where we're really seeing price action along
the yield curve," she said.
    Fed Governors Lael Brainard and Michelle Bowman were due to
speak later on Wednesday.
    In cryptocurrencies, bitcoin  BTC=BTSP  traded up 1.88% at
$57,048.91, after reaching a five-month high of $57,855.79 at
the start of the week.

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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by John McCrank; Editing by Carmel CrimminsF, Giles
Elgood and Jonathan Oatis)
 ((john.mccrank@thomsonreuters.com Twitter @jmccrank; 1 646
223-6643; Reuters Messaging:
john.mccrank.thomsonreuters.com@reuters.net))

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