Dollar Turns In Sluggish Performance As Markets Await Inflation Data

(RTTNews) - The U.S. dollar turned in a sluggish performance on Wednesday with traders looking ahead to the crucial inflation data for the month of September, for clues about Federal Reserve's next move on interest rate hikes.

After staying weak during the Asian session, the dollar climbed higher, and after coming off the session's high, moved higher again after the Fed minutes indicated more aggressive rate hikes to tame inflation. However, it failed to hold at higher levels and dropped down again before finding some support.

The minutes from the Fed meeting showed policymakers pushed back on the idea of a pivot, choosing to give priority to their commitment to fight inflation.

The minutes showed that the policymakers felt slowing the pace of tightening would be appropriate while assessing the effects of cumulative policy adjustments on growth and inflation.

The members lowered their projections for the economy and expect GDP to grow at just a 0.2% annualized pace in 2022 and just 1.2% in 2023, well below trend and big drop from 2021, which saw the strongest gains since 1984.

The summary of economic projections at the meeting pointed to a "terminal rate," or end point of rate increases to be around 4.6%.

Data released by the Labor Department today showed the Producer Price Index for final demand in the U.S. increased by 0.4% month-over-month in September, rising for the first time in three months. The index had slipped by a revised 0.2% in August. Year-on-year, the PPI jumped 8.5% in September, the data showed.

The dollar index was at 113.28 a little while ago, up marginally from the previous close. Earlier, the index had climbed to 113.59.

Against the Euro, the dollar was little changed at 0.9705 a little while ago. Eurostat data showed that Eurozone industrial output rose strongly in August. Output from factories, mines and utilities rose 1.5% in August month-on-month, while economists had expected a 0.5% increase.

Year-on-year, industrial production increased 2.5% in the month.

The dollar was at $1.1100 against Pound Sterling, easing from Tuesday's closing level of $1.0968 a unit of the British currency. The U.K. economy contracted unexpectedly in August on weak services and industrial production, a report from the Office for National Statistics showed. GDP shrank 0.3% month-on-month, in contrast to the revised 0.1% growth in July. GDP was forecast to remain flat after July's initially estimated growth of 0.2%.

Against the Japanese currency, the dollar firmed to 146.91 yen, gaining from 145.86 yen.

Against the Aussie, the dollar was down slightly at 0.6277. The Swiss franc was down marginally at CHF 0.9974 a dollar, compared to Tuesday's close of CHF 0.9968.

The dollar gained against the Loonie, fetching C$1.3820, up from the previous close of C$1.3798.