U.S. CPI increase at its fastest pace since 1990, roiling markets
The dollar went up on Thursday after data overnight showed that U.S. consumer prices increased at the fastest pace since 1990 last month, which could cause a case for faster Federal Reserve policy tightening.
Nominal U.S. Treasury yields shot higher, with that on the benchmark 10 - year note leaping by the most since February, while real yields, which take inflation into account, dipped to record lows.
The price of currency rose to a five-month high as investors sought inflation hedges.
The oil pulled back from its seven-year highs after U.S. President Joe Biden said his administration was looking for ways to reduce energy costs.
The broadest index of Asia-Pacific shares outside Japan was down by 0.85%, which led to a 1.19% drop in Australia's benchmark.
Japan's Nikkei went down by 0.24%, supported by the weakness of the yen against a resurgent dollar, and as the U.S. stock futures went up slightly.
Over night, the S&P 500 went down by 0.82%, its worst day in more than a month. The index closed at a record peak to start the week after it marked the first back to back declines in a month.
The dollar index, which gauges the currency against six major peers, including the euro and the dollar, was just below the high reached on Wednesday of 94.905, a level not seen since July of last year.
The dollar added 0.13% to 114.04 yen at the start of the week, up from as low as 112.73 at the start of the week.
The U.S. consumer price index surged 6.2% on an annual basis, with gasoline leading a broad-based increase that added to signs that inflation could stay uncomfortably high in 2022 amid scared global supply chains.
According to other data on Wednesday, the number of Americans filing claims for unemployment benefits fell to a 20 month low.
The Fed and the White House have said that prices will fall once supply bottlenecks start easing, with the central bank only last week reiterating that high inflation is expected to be transitory as policy makers urged patience.
Rodrigo Catril, a senior foreign exchange strategist at National Australia BankAustralia Bank in Sydney, wrote in a client note that the Fed's resolve is facing a testing time.
The Fed is trying to start a monetary policy response due to the rise in core drivers, but the rise in core drivers increases the pressure on the Fed to start a monetary policy response. The Fed will increase its first interest rate by July, according to the money market.
The benchmark 10 year Treasury yield jumped the most in seven weeks to as high as 1.592% on Wednesday. The Treasury market is closed globally on Thursday for a U.S. holiday.
The yield on the 10 year Treasury Inflation-Protected Securities TIPS went down to as low as an unprecedented 1.243% before falling higher over the course of the session.
Inflation expectations soared, with the five-year breakeven inflation rate rising to a record 3.113%.
The CBOE volatility index, Wall Street's fear gauge, touched its highest level in nearly one month, as the volatility occurred in other markets.
Spot gold traded around $1,850 after it surging as high as $868, which was a good value. 20 overnight for the first time since mid-June.
The new record high of $69,000 went up to a new record high before it went down to last trade just below $65,000.
U.S. West Texas Intermediate WTI crude gained 25 cents to $81.39 per barrel but was well off the overnight high of $84.97 and seven-year peak of $85.41 reached late last month.
The Brent crude futures went down 30 cents to $82.94 a barrel, but fell from its high at $85.50 on Wednesday and the three-year peak of $86.70 in October.