FOREX-Dollar pauses after rallying to one-year high earlier in week

Reuters

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    By Kevin Buckland
    TOKYO, Oct 14 (Reuters) - The dollar touched its lowest this
week against major peers on Thursday, taking a breather from a
rally that had lifted it to a one-year high powered by
expectations for quicker Federal Reserve interest rate hikes.
    The dollar index  =USD , which measures the currency against
six rivals, was about flat at 94.016, after dropping 0.53% on 
Wednesday, the most since Aug. 23.
    The index reached 94.563 on Tuesday, its highest since late
September 2020, after surging nearly 3% since early last month.
    The dollar pulled back even after minutes of the Federal
Open Market Committee's September meeting confirmed tapering of
stimulus is all but certain to start this year, and showed a
growing number of policymakers worried that high inflation could
persist.  nL1N2R91NQ 
    A Labor Department report showed U.S. consumer prices rose
solidly in September, and they are likely to rise further amid a
surge in energy prices, potentially pressuring the Fed to act
sooner to normalise policy.  urn:newsml:reuters.com:*:nL1N2R914S
    The U.S. 5-year, 5-year-forward breakeven inflation rate
 USIL5YF5Y=R , one of the more closely followed gauges of
long-term inflation expectations, surged to its highest level in
seven years at 2.59% overnight.  nL1N2R92Z2 
    Most Fed officials, including Chair Jerome Powell, have so
far contended that price pressures will be transitory. 
    Money markets are currently pricing about 50/50 odds of a
first 25 basis point rate hike by July.  FEDWATCH 
    "The USD's reaction may be an example of 'buy the rumour,
sell the fact,'" Joseph Capurso, a strategist at Commonwealth
Bank of Australia, wrote in a client note.
    "We consider the FOMC's assumption of a transitory spike in
inflation is wrong. A more aggressive tightening cycle will
support the USD in our view."
    The dollar edged 0.11% higher to 113.37 yen  JPY=EBS , but
back from the three-year peak of 113.80 yen hit overnight.
    The euro  EUR=EBS  was mostly flat from Wednesday at
$1.1599, but earlier touched $1.1601 for the first time since
Oct. 5.
    Sterling  GBP=D3  was little changed at $1.3665, holding
Wednesday's 0.55% advance and near its highest level this month.
    Bitcoin  BTC=BTSP  edged higher to touch a five-month peak
at $58,300.

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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Kevin Buckland; Editing by Muralikumar
Anantharaman)
 ((Kevin.Buckland@thomsonreuters.com;))

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