U.S. core CPI slightly more softer than expected in July, than expected.
Euro rises, but remains within the range of 2021 low of $1.1704 in 2021.
New York, Aug. 11 - The dollar was lower on Wednesday after consumer price increases saw U.S. inflation data ease in July, while still historic high, taking some pressure off the Federal Reserve in regard to the timing of tapering its assets purchases used to support the economic recovery.
The consumer price index went up 0.5% last month after climbing 0.9% in June, the Labor Department said. In the 12 months of July, CPI moved by 5.4%. Excluding volatile food and energy components, the CPI rose 0.3% after increasing in June by 0.9%.
Economists polled by Reuters forecast that the core CPI would increase 0.5% and overall CPI 0.4%.
The Fed has said it expects inflation pressures to be moderated over time as demand catches up with supply after months of COVID 19 lockdowns and the Fed will follow.
The July CPI report tempers concerns that the Fed could start dialing back its bond buying sooner rather than later, said Edward Moya, senior market analyst in OANDA.
This Fed is going to be data dependent and it all goes to be the job report of next month and if that does not impress, tapering, as far September goes, might even get pushed out towards the end of the year.
The dollar index, which measures the greenback against a basket of other major currencies, was down 0.124% at 92.958, at 10: 00 a.m. Eastern time.
Earlier, it hit 93.195, the highest since April 1 and not far off of its 2021 high of 93.439.
The greenback had benefited from the impressive U.S. jobs data of last week and from remarks by Fed officials about tapering bond purchases and, eventually raising rates, sooner than policymakers elsewhere?
The stronger than expected non-farm payrolls report on Friday helped the dollar across the board as it seemingly helped the Fed move closer to QE taper and policy normalisation, said Valentin Marinov, head of G 10 FX research at Credit Agricole.
In addition, the U.S. SenateU.S. Senate has passed President Biden's infrastructure package and thus strengthened market expectations of growing U.S. Treasury issuance at a time when the Fed will be expected to announce their plan to reduce their U.S. Treasury buying.
In Germany, investor sentiment has declined, with a survey of a third consecutive month of deterioration in Europe as rising COVID and 19 - case raise market pressures.
Investors have to take over the possibility of news on Fed tapering at a time when COVID is still very apparent in various parts of the world, said Rabobank analyst Jane Foley.
The consequence of this is likely to be a weaker dollar, she added, especially if the euro breaches its low 2021 for the Euro Areas.
The euro gained 0.11% against the greenback, to 1.1734, following six straight sessions of losses and having fallen as low as 1.1706 in early deals in Europe, near the January low of $1.1704.
Sterling fell with 0.13% to 1.38555 against the dollar, rallying from a two-week low.
The yen was up 0.06% at 110.495, after falling for five consecutive sessions against the dollar.
South Korea reported a record number of COVID cases on Wednesday, while outbreaks in China, Southeast Asia and Australia grow steadily.
The Australian dollar and the New Zealand dollar, seen as riskier currencies, rose following the U.S. CPI report last up 0.35% and 0.56% respectively.