The dollar closed little changed on Tuesday after strong inflation data renewed the likelihood of the Federal Reserve raising interest rates next week as fears of a looming economic crisis in the US subsided.
The dollar index, which measures the performance of a basket of six currencies, fell 0.087%, and the Treasury yield rose, a day after the two-year mark, which is driven by the pace of consumer expectations, suffered the largest daily drop. 1987
The euro rose 0.09% to $1.0739, and the dollar gained ground against the safe-haven Swiss franc and Swiss franc.
The Federal Reserve also turned to a strong probability that the Federal Reserve will remain neutral at the end of its two-day policy meeting on March 22, according to CME’s H Watch tool. That probability came to 28.4% from 43.9% on Monday.
Investors disagree on whether high inflation will push H to raise rates again next week, after the failure of Silicon Valley Bank and Signature Bank sent financial markets into turmoil.
US interest rates higher than government debt this year have supported the strength of the dollar.
“Short-term decisions are more likely to be driven by financial markets and what the financial system actually needs, rather than what mandated inflation demands,” said Brian Daingerfield, co-head of FX strategy for the G-10 at Nat West Market.
The Consumer Price Index (CPI) rose 0.4% last month, after accelerating 0.5% in January. In the 12 months to February, the CPI rose 6.0%, a slower pace than January’s 6.4%, but still far from the 2% federal target.
The Japanese yen weakened 0.69% to 134.13 per dollar, while the greenback climbed 0.15% against the Swiss franc. Meanwhile, sterling was down 0.05% at $1.2175, after rising 1.22% on Monday.
