The dollar increased on Friday after a better-than-expected US inflation report raised the likelihood that the Federal Reserve would have to keep interest rates elevated for a longer period. Meanwhile, the Chinese yuan, Australian dollar, and New Zealand dollar managed to avoid the negative impact of weak consumer and producer prices data from China, as a slowdown in the pace of decline in trade statistics provided some hope for currency stability.
The dollar received support after Thursday's data showed consumer prices in the United States rose due to a surge in rental costs in September. Although a steady moderation in core inflation pressures bolstered expectations that the Fed would not raise interest rates next month, the data increased the odds of maintaining higher rates for some time. David Doyle, head of the economics department at Macquarie, stated in a note, "The September consumer price index data reveals further challenges regarding the latest ongoing efforts to push inflation towards the Fed's target of two percent."
The dollar index, which measures the performance of the US currency against six major currencies, dipped slightly to 106.38 during Asian trading hours, pulling back from Thursday's high of 106.6. The euro rose approximately 0.2 percent to 1.0549 dollars after sliding overnight against the dollar, while the British pound also increased by 0.2 percent to 1.2202 dollars.
Investors were also evaluating the impact of producer and consumer price data released from China, which indicated that deflationary pressures were slightly stronger than expected. At the same time, September trade data from China showed that exports and imports contracted at a slower pace for the second month, providing some encouragement for the authorities.
The yuan showed little change in foreign exchange trading following the data, recording 7.3061 to the dollar. The Australian dollar was stable in the latest trading at 0.6317 dollars.
