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Dollar gains as inflation pressures persist; eyes on c.bank meetings

SINGAPORE, Dec. 12 (Reuters) – The dollar rose on Monday after data from Friday showed US producer prices rose more than expected last month, pointing to continued inflationary pressures and a chance the Federal Reserve will keep interest rates high for longer .

The dollar rose 0.35% against the Japanese yen to 137.05. Against a basket of currencies, the US dollar index gained 0.12% at 105.18.

The euro was last down 0.2% at $1.0509.

Sterling fell 0.31% to $1.2229 in Asia trading on Monday, while the Aussie fell 0.34% to $0.6773.

The kiwi also fell 0.34% to $0.6393.

The U.S. producer price index for final demand was up 0.3% in November month-on-month and 7.4% year-on-year, data released Friday showed, a slight upside surprise from forecasts from the US, respectively. an increase of 0.2% and 7.2%.

“There was a bit of concern about how inflation would be sustained at a high level and encourage the Fed to keep policy at a restrictive level even longer than previously expected,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia (CBA). ). .

Traders have also been kept on edge ahead of major risk events this week, including US inflation data and a slew of major central bank meetings.

The Federal Reserve is once again taking center stage and is expected to raise rates by 50 basis points, although the focus will be on the central bank’s updated economic projections and Fed Chairman Jerome Powell’s press conference.

“If he talks more about the risks to the economy… I think that will probably be seen as dovish by markets and of course markets like dovish comments and how the FOMC will pay more attention to downside risks to the economy.” said CBA’s Kong.

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The Bank of England and the European Central Bank (ECB) will also meet this week, and both are also expected to hike rates by 50 basis points.

“ECB officials have told us they care more about underlying inflation, which has remained high,” Kong said of the ECB’s upcoming meeting.

“If they rise at 50 bps … they can make some pretty aggressive comments in Lagarde’s post meeting conference.”

Ahead of the FOMC meeting, November US inflation data is expected on Tuesday, with economists expecting core inflation to reach 6.1% year on year.

“The market response to U.S. inflation surprises has been asymmetric so far in 2022, with downside surprises outweighing upside,” Barclays analysts said.

“Inflationary pressures will likely be the bigger driver of the two, (given) the Fed’s guidance toward smaller hikes,” they added, citing impacts on the US dollar. The offshore yuan fell slightly to 6.9798 per dollar, further weighed down by concerns over a possible spike in COVID cases as China eases its strict COVID-19 restrictions.

Reporting by Rae Wee; Edited by Lincoln Feast and Bradley Perrett

Our Standards: The Thomson Reuters Principles of Trust.

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