The dollar retreats with the return of risk appetite; US inflation returns to the Fed’s view

MEW YORK, Feb 25 (Reuters) – The U.S. dollar fell on Friday, giving back some of the previous day’s strong gains, as investors weighed the latest round of sanctions against Russia and U.S. inflation data were considered as unlikely to make the Federal Reserve too aggressive at its next policy meeting.

The greenback posted its biggest one-day percentage gain since November 10 on Thursday to hit 97.74, its highest since June 30, 2020. However, it lost some gains after US President Joe Biden hit Russia with a wave of sanctions following that country’s decision. the invasion of Ukraine, but refrained from imposing sanctions on Russian President Vladimir Putin and disconnecting Russia from the SWIFT international banking system. Read more

US economic data showed consumer spending rose more than expected in January even as price pressures mounted, with annual inflation last hitting rates four decades ago, although the index prices for personal consumption expenditure rose 0.6% in January after rising 0.5% in December. Read more

“Revisions to income and expenditure data show that the economy has been very resilient to Omicron and high oil prices. Hopefully the situation with Russia will be short-lived, but even if oil prices remain high , the economy should have enough fundamental strength to tolerate high energy prices,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.

“The inflation numbers weren’t great, but at least the month-over-month inflation numbers aren’t going up,” Jacobsen said. “That should cut the wind under the wings of the more hawkish members of the Fed.”

The dollar index fell 0.459%, with the euro up 0.59% at $1.1257. The euro fell to $1.105 on Thursday, its weakest against the greenback since June 1, 2020.

Even with Friday’s pullback, the dollar was still on course for a third straight week of gains.

Heightened risk appetite was evident in the U.S. stock market, with the S&P 500 rising more than 2% after staging a late-trading rally on Thursday. Read more

Before Thursday’s jump – which sent the dollar to its highest level since June 30, 2020 – the greenback had been subdued in recent weeks, as rising tensions in Ukraine fueled expectations that the Fed could be less aggressive in tightening policy as it tries to rein in inflation.

Expectations of an interest rate hike of at least 50 basis points at its March meeting fell to 25% from around 34% a day ago, according to the CME. FedWatch Tool.

In the central bank’s latest monetary policy report to Congress, the Fed warned that inflation could last longer than expected if labor shortages and rapidly rising wages continue. Read more

The European Union is planning a third round of sanctions against Moscow, an EU official said on Friday, minutes after Ukraine’s president pleaded with the bloc for faster and stronger action to punish Russia for its invasion. from his country. Read more

European Central Bank (ECB) policymakers have said the situation in Ukraine could cause the ECB to slow its exit from stimulus. Read more

Investors see just a 4% chance of the ECB raising its benchmark interest rate by 10 basis points at its March 10 policy meeting. IRPR

The Russian ruble strengthened 1.67% against the greenback to 83.04 per dollar after hitting a record low of 89.986 the day before.

The Japanese yen weakened 0.09% against the greenback at 115.65 to the dollar, while the pound last traded at $1.34, up 0.19% on the day.

In cryptocurrencies, bitcoin last rose 1.4% to $38,937.21.

Ethereum was last up 2.58% at $2,703.53.

Reporting by Chuck Mikolajczak; edited by Jonathan Oatis

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