Dollar Rebounds After Mild Setback

(RTTNews) - After holding firm in the European session, the U.S. dollar briefly slipped into negative territory in early New York session on Wednesday after inflation data that came in line with expectations raised hopes the Fed will lower interest rates by another quarter point next week.

However, the currency regained lost ground and climbed higher as the day progressed, scoring gains against most of its major counterparts.

The Labor Department said its consumer price index climbed by 0.3% in November after rising by 0.2% for four straight months. The increase matched expectations. The annual rate of growth by consumer prices ticked up to 2.7% in November from 2.6% in October, which was also in line with estimates.

The Labor Department also said core consumer prices in November jumped by 3.3% compared to the same month a year ago, unchanged from October and in line with estimates. The inflation report has increased confidence the Federal Reserve will lower interest rates by another quarter point next week.

CME Group's FedWatch Tool is currently indicating a 96.4% chance the Fed will cut rates by 25 basis points at its December meeting.

The dollar index, which dropped to 106.27, rallied to 106.80 before easing to 106.65, but still stayed well above the flat line, gaining about 0.25%.

Against the Euro, the dollar firmed to 1.0498 from 1.0530, ahead of the European Central Bank's monetary policy announcement, due on Thursday.

The dollar strengthened to 1.2749 against Pound Sterling, gaining from 1.2772. Against the Japanese currency, the dollar climbed to 152.50 yen from previous close of 151.97 yen.

The dollar gained marginally against the Aussie at 0.6370. Against Swiss franc, the dollar moved higher, fetching CHF 0.8842 a unit, ahead of tomorrow's rate decision by the Swiss National Bank.

The dollar weakened against the Loonie after the Bank of Canada cut interest rates by 50 basis points and said it will evaluate the need for additional easing. The loonie, which firmed to 1.4120 gave up some gains subsequently and was last seen at 1.4160 a unit of U.S. dollar.