NEW YORK (AP) - The dollar rose against the euro and the pound Wednesday after a government report showed U.S. consumer prices rose more than economists expected in January and the release of Federal Reserve January meeting minutes hinted at future rate hikes.
The 15-nation euro fell to $1.4717 from $1.4732 late Tuesday in New York.
The drop came after the morning release of Labor Department data showing the closely watched Consumer Price Index posted a gain of 0.4 percent last month, matching the December increase and higher than economists had expected.
The higher inflation readings are certain to attract the attention of the Fed, which has been cutting interest rates aggressively to ward off a recession. Boosting interest rates is seen as a way to contain inflation.
Lower interest rates can jump-start a nation's economy, but may weigh on its currency as traders transfer funds to countries where they can earn higher returns. Raising interest rates can prop up a currency.
The Fed also cut its own economic forecast, trimming its expectations of economic growth in 2008 to 1.3 percent to 2 percent from 1.8 percent to 2.5 percent. It also predicted higher unemployment and inflation, which may prevent it from continuing to chop at interest rates.
The release of the Fed minutes from the Jan. 29-30 meeting included a statement that implied rate hikes were in store. When economic conditions improve, the Fed said "a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate."
The British pound fell to $1.9432 from $1.9491 on Tuesday after the minutes from the last meeting of the Bank of England's Monetary Policy Committee showed that the decision to lower its interest rate to 5.25 percent was unanimous.
Economists said that minutes from the meeting supported the widespread belief that rates would be cut further in the coming months, but noted that the bank is still facing the difficult balancing act of containing rising inflation while trying to support growth.
The dollar also rose to 108.15 Japanese yen from 107.60 yen and to 1.0993 Swiss francs from 1.0943 Swiss francs.
But the dollar fell to 1.0127 Canadian dollars from 1.0171 Canadian dollars. |