Dollar hovers at two-month high vs. yen after CPI boost
By Shinichi Saoshiro
TOKYO (Reuters) - The dollar hovered at a two-month high versus the yen and stood firm against other peers after surging on a higher-than-expected U.S. core consumer price index that supported the Federal Reserve's case for a rate hike later this year.
Data on Friday showed the core U.S. CPI increased 0.3 percent in April amid rising shelter and medical care costs. It was the largest rise in the core CPI since January 2013 and followed a 0.2 percent gain in March.
The dollar traded near a two-month high of 121.70 yen after jumping from a low of 120.64 on Friday, helped by a rise in U.S. Treasury yields triggered by the CPI data. A rise above 122.04 would take the greenback to an eight-year high against the yen.
"Whether the dollar can breach the 122.04 yen threshold depends on upcoming U.S. data. While a June rate hike is no longer a likelihood, upbeat indicators that would back up Friday's CPI numbers will fan hopes that the Fed will provide hints at the June meeting on when it might hike rates," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.
The euro was down 0.3 percent at $1.0986 , having touched a one-month low of $1.0964 earlier in the session.
The common currency reached a three-month peak of $1.1468 as recently as May 15, along with a surge in euro zone bond yields and lessened pessimism towards the European economy.
But it has since sank on factors including prospects of more easing by the European Central Bank, persisting Greek debt woes and revived demand for the dollar.
The U.S. economy's recovery has not been as robust as expected, dashing prospects for the Fed to raise rates in June and prompting the markets to push back their expectations to September or later.
Nevertheless, bits and pieces of upbeat data released this month have shown that the U.S. economy still stands a head above those of other developed economies such as the euro zone and Japan, still deeply committed to easy monetary policies.
Amid reminders that the Fed is still most likely to raise rates ahead of its G7 peers, the dollar index hovered close to a one-month high of 96.311 <.DXY>.
The pound was little changed at $1.5483 after shedding more than one percent overnight against the bullish dollar. The Australian dollar, which also suffered big losses overnight, traded near a three-week low of $0.7808 .
(Editing by Jacqueline Wong)
