By Joseph Adinolfi, MarketWatch , Hiroyuki Kachi
Euro falls to $1.10 Friday
The dollar was on track to book its first weekly gain against
the euro in five weeks Friday afternoon.
The U.S. currency surged against its major rivals after a report
showed consumer prices rose in April by the fastest rate since
January 2013, a sign that inflation in the U.S. may finally be on
track to meet the Federal Reserve's inflation target.
Core consumer prices rose 0.3% in April,
(http://www.marketwatch.com/story/housing-healthcare-behind-strong-rise-in-core-inflation-in-april-2015-05-22)
according to Labor Department data. Economists surveyed by
MarketWatch had expected a 0.1% gain.
It was up 3.2% on the week, but remains about 5% below a
more-than 12-year-high against the euro, reached in mid-March.
The euro (EURUSD) fell to $1.1000 after the data, its lowest
level in about three weeks, from $1.1110 late Thursday in New York.
It traded at $1.1028 Friday afternoon. The dollar (USDJPY)
strengthened to 121.48 yen, its highest level since mid-March, from
Yen121.05 late Thursday. The pound (GBPUSD) weakened to $1.5483,
from $1.5662.
Federal Reserve Chairwoman Janet Yellen, speaking Friday
afternoon in Providence, R.I., said the central bank will likely
raise interest rates this year
(http://www.marketwatch.com/story/yellen-sticks-to-forecast-of-rate-hike-this-year-followed-by-gradual-moves-2015-05-22)
if the economy improves as expected. It's been widely expected that
the Fed would act in the second half of this year, and the dollar
was little changed in the wake of her comments.
Mark Luschini, chief investment strategist at Janney Montgomery
Scott, said the CPI report was a "surprise" for the market, causing
Treasurys, which were up ahead of the data, to turn lower, an early
rally in gold to fade, and the dollar to move sharply higher.
"There's symmetry in all those readings," Luschini said. "That's
a number that was somewhat Fed-friendly, giving the Fed ammunition
if they want to raise interest rates this year."
Strong economic data typically strengthens the dollar because it
increases the likelihood that Federal Reserve policy makers will
raise rates earlier. Higher interest rates typically lead
currencies to strengthen, because they increase the return on
deposits held in that currency.
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