(New throughout, updates trading and comments to U.S. market open,
new byline, changes dateline, previous LONDON)
By Karen Brettell
NEW YORK, June 12 (Reuters) - The U.S. dollar was modestly higher
on Wednesday as trade tensions and U.S. interest rate policy remained
in focus, after briefly weakening earlier on data showing that U.S.
consumer prices barely rose in May.
The greenback has come under pressure as tepid inflation and
weakening economic data adds to bets that the Federal Reserve is
closer to cutting interest rates.
Still, a sustained decline against the euro has not yet emerged as
the U.S. currency still benefits from relatively higher rates than in Europe.
“You still have a very large divergence between the Federal
Reserve and the European Central Bank, and that’s really what’s
precluding a sustained euro/dollar rally based on the expectations of
what the Fed’s going to do going forward,” said Bipan Rai, North
American head of FX strategy at CIBC Capital Markets in Toronto.
The dollar dropped sharply on Wednesday after the Labor Department
said its consumer price index edged up 0.1% last month. Excluding the
volatile food and energy components, the core CPI nudged up 0.1% for
the fourth straight month.
The decline was not sustained however, with the dollar index
against a basket of six major currencies last up 0.11%.
Fed officials, including Chairman Jerome Powell, have sought to
explain low price pressures as being transitory.
The Fed is not widely expected to cut rates when it meets on June
18-19, though investors will be watching for any new signals that a
cut is getting nearer.
Interest rate futures traders are now pricing in a 22% chance of a
cut in June, and an 85% likelihood of a cut in July.
Low inflation is a concern for the Fed at the same time as the
U.S.-China trade war threatens to derail global economic growth.
Investors are also nervous that trade battles will spread to Japan
and Europe, with U.S. President Donald Trump on Tuesday accusing
Europe of devaluing the euro zone's single currency.
"The Euro and other currencies are devalued against the
dollar, putting the U.S. at a big disadvantage," Trump tweeted.
He also renewed his attack on the U.S. central bank, saying that
interest rates were too high.
Currency bid prices at 9:32AM (1332 GMT)
Description RIC Last U.S. Close Pct Change
YTD Pct High Bid Low Bid
Euro/Dollar EUR= $1.1312 $1.1329 -0.15%
-1.38% +1.1343 +1.1311
Dollar/Yen JPY= 108.5000 108.5000 +0.00%
-1.60% +108.5700 +108.2200
Euro/Yen EURJPY= 122.74 122.89 -0.12%
-2.76% +122.9900 +122.6100
Dollar/Swiss CHF= 0.9949 0.9922 +0.27%
+1.38% +0.9953 +0.9904
Sterling/Dollar GBP= 1.2736 1.2722 +0.11%
-0.16% +1.2758 +1.2716
Dollar/Canadian CAD= 1.3291 1.3279 +0.09%
-2.54% +1.3304 +1.3278
Australian/Doll AUD= 0.6944 0.6960 -0.23%
-1.49% +0.6963 +0.6943
Euro/Swiss EURCHF= 1.1256 1.1240 +0.14%
+0.03% +1.1264 +1.1226
Euro/Sterling EURGBP= 0.8881 0.8901 -0.22%
-1.14% +0.8912 +0.8873
NZ NZD= 0.6577 0.6582 -0.08%
-2.08% +0.6589 +0.6567
Dollar/Norway NOK= 8.6394 8.6279 +0.13%
+0.01% +8.6458 +8.6183
Euro/Norway EURNOK= 9.7729 9.7773 -0.05%
-1.34% +9.7948 +9.7723
Dollar/Sweden SEK= 9.4403 9.4496 -0.25%
+5.32% +9.4569 +9.4196
Euro/Sweden EURSEK= 10.6785 10.7050 -0.25%
+4.04% +10.7173 +10.6760
(Editing by Bernadette Baum)
((Karen.Brettell@thomsonreuters.com; +1 646 223 6274; Reuters