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Dollar holds near 14-month peak ahead of Fed statement

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Shutterstock photo - - The dollar remained broadly supported near 14-month highs against the other major currencies on Tuesday, after the release of tepid U.S. producer price inflation data as investors awaited the outcome of the Federal Reserve's two-day policy meeting on Wednesday.

Official data showed that U.S. producer price inflation was flat last month, compared to expectations for a 0.1% rise, after a 0.1% gain in July.

Core PPI, which excludes food, energy, and trade rose 0.1% in August, in line with expectations, after an increase of 0.2% in July.

Demand for the dollar continued to be underpinned by expectations for an early hike in U.S. interest rates.

The Fed was expected to cut its asset purchase program by another $10 billion at its upcoming policy meeting on Wednesday, which would keep it on track for winding up the program in October, and to start raising interest rates sometime in mid-2015.

USD/JPY was just below six-year highs, slipping 0.10% at 107.07 as the diverging monetary policy stance between the Fed and the Japanese central bank continued to pressure the yen lower.

The yen came under pressure last week after Bank of Japan Governor Haruhiko Kuroda said that the bank would be prepared to immediately loosen monetary policy or implement other measures if its 2% inflation target becomes difficult to meet.

The euro edged up against the dollar, but still remained within close distance of a 14-month low with EUR/USD adding 0.09% to 1.2952.

The euro shrugged off data showing that the ZEW index of German economic sentiment fell to a 21-month low of 6.9 this month, down from 8.6 in August.

GBP/USD slid 0.21% to 1.6198, as investors eyed the upcoming referendum on Scottish independence, scheduled on Thursday.

Earlier Tuesday, official data showed that U.K. consumer price inflation rose 0.4% in August, in line with market expectations. On a year-on-year basis, U.K. CPI slowed to 1.5% last month from 1.6% in July.

The report also showed that the house prices index climbed 11.7% in July, compared to forecasts for a reading of 10.6% and following a 10.2% increase in June.

USD/CHF fell 0.25% but remained close to a one-year high at 0.9330.

AUD/USD was steady at 0.9030. In the minutes of its September policy meeting, the Reserve Bank of Australia reiterated its decision to keep interest rates on hold for an extended period of time and added that the exchange rate remains "above most estimates of its fundamental value."

Meanwhile, NZD/USD slipped 0.13% to 0.8165 and USD/CAD edged down 0.23% to 1.1032.

In Canada, data showed that manufacturing sales rose 2.5% in July, exceeding expectations for a 1.1% gain, after a revised 0.9% increase the previous month.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, held steady at 84.37, not far from last week's 14-month peak of 84.65. offers an extensive set of professional tools for the financial markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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