By Hannah Lang
NEW YORK (Reuters) -The U.S. dollar rose on Thursday on warmer-than-expected inflation, while the euro traded slightly lower following the European Central Bank’s decision to cut interest rates for the fourth time this year.
A Labor Department report on Thursday showed producer prices rose 0.4% month-on-month in November, compared with estimates of a 0.2% increase according to economists polled by Reuters.
The , which measures the currency against a basket of six others, was last up 0.375% at 106.95, a day after a separate U.S. inflation gauge confirmed bets on a Federal Reserve rate cut next week.
Markets are now almost fully pricing in a 25 basis point cut at the Dec. 17-18 Fed meeting, compared to about a 78% chance a week ago, the CME FedWatch tool showed.
“Although the Fed is cutting its benchmark by a quarter of a point, moves over the past 24 hours – from the Bank of Canada, the Swiss National Bank and the European Central Bank – have ensured that interest rate differentials between currencies will remain wide relative to the The US is maintaining the dollar’s position in relative terms,” Karl Schamotta, chief market strategist at Corpay, said in a note.
The ECB cut rates by 25 basis points on Thursday, keeping the door open for further easing as inflation nears its target and the economy remains weak.
The euro last fell 0.2% against the dollar at $1.0473.
The Swiss franc rose against the dollar after the Swiss National Bank opted for a 50 basis point interest rate cut. A majority of economists polled by Reuters had expected a smaller move of 25 basis points.
The dollar rose 0.78% to 0.89135 francs.
“There will be some headwinds in the near term,” said Kirstine Kundby-Nielsen, FX research analyst at Danske Bank (CSE:), on the Swiss franc after the interest rate cut.
“But more broadly, I still think the Euro-Swiss rate will fall and the franc will strengthen, looking at the next few months, because I don’t think the picture is very rosy in the Eurozone.”
The dollar was slightly higher at 152,525 yen after hitting a two-week high of 152,845 yen the day before, as market players scaled back bets on a rate hike in Japan next week.
Reuters reported on Thursday that the BOJ is leaning toward keeping rates steady as policymakers prefer to spend more time examining foreign risks and clues about next year’s wage prospects.
But with markets eyeing a rate hike just a month later in January, this shift hasn’t become a major driver for investors to buy into the dollar against the yen, said Akira Moroga, chief market strategist at Aozora Bank.
“There were expectations for December, so the dollar/yen has risen from around 150 yen to around the 200-day average,” he said.
The Australian dollar fell 0.06% to $0.6365, moving further from a little more than a year low of $0.63370 reached on Wednesday.
Australia’s unemployment rate dropped to an eight-month low in November, prompting markets to scale back expectations for an easing from the Reserve Bank of Australia in February.
The price was last down 0.25% at $0.577 after hitting the lowest level since November 2022 at $0.57625 in the previous session.
The yuan last traded around 7.2772 per dollar in offshore trading.
China pledged Thursday to increase its budget deficit, issue more debt and ease monetary policy to maintain stable economic growth.