February 14, 2018 / 6:28 PM / 10 months ago

FOREX-Dollar reverses earlier gains as equities show resilience

    * Dollar falls as stocks rebound from CPI news
    * U.S. core CPI posts largest gain in a year
    * Retail sales post largest decline in 11 months

 (Updates news, table, quotes and prices)
    By Kate Duguid
    NEW YORK, Feb 14 (Reuters) - The U.S. dollar fell on
Wednesday, as equity markets rebounded quickly following a
stronger-than-expected inflation data report.
    The announcement that the U.S. core Consumer Price Index
posted its biggest gain in a year raised expectations that price
pressures may accelerate, prompting a faster pace of interest
rate increases from the Federal Reserve. The possibility that
the Fed would clamp down on inflation initially drove up the
dollar index.
    But the dollar quickly fell to a session low of 89.231
against a basket of currencies, as the equity market recovered
from earlier losses and Treasury bond yields remained
    The riskoff trade - that is, the sale of riskier currencies
in emerging markets and the Australian and Canadian dollars in
favor of safer havens - that investors put on immediately after
the CPI release "have come bouncing back, helped by equity
resilience," said Alan Ruskin, global head of currency strategy
at Deutsche Bank in New York. 
    After opening lower at the bell, the S&P 500 rose to
2,686.9, its highest since Feb. 8. The Dow Jones Industrial
Average followed the same trend, opening lower before
rising to 0.5 percent above its last close.
    The dollar's limited rise may have also been related to a
surprise decline in U.S. retail sales in January.
    "Retail sales truly disappointed," said Juan Perez, senior
FX trader and strategist at Tempus, Inc in Washington. "They
kept the dollar from blowing up after stellar CPI. People need
to be buying things in order for the economy to grow and it
seems like we're lacking on that." 
    As the market digested the data, initial perceptions of the
importance of the CPI print may have waned. "With an expected
slowdown in PCE (personal consumption expenditures) in January,
I think that's probably going to mix some of the sentiment at
the Fed," said Lennon Sweeting, chief market strategist at XE
Money Transfers in Toronto.
    As the dollar weakened, both sterling and the euro
recovered. At 12:47 p.m. EST (1747 GMT) the British pound
was at $1.398, up 0.65 percent from Tuesday's close.
    The single currency was at $1.242, up nearly half a
percent from its last close, supported also by
stronger-than-expected euro zone industrial production data for
    The yen rose to a 15-month high against the dollar at 106.70
 earlier in the day. The Japanese currency was last at
    "The fact that the yen has still hung in there, and is still
stronger vis-à-vis the dollar suggests that in this instance the
tail isn't going to wag the dog," said Ruskin. "In other words,
the squeeze that you've had on yen crosses from things like the
Aussie dollar are not being translated into (the dollar/yen) ...
the dollar/yen could have gone higher in that environment."
    Currency bid prices at 12:59PM (1759 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2415        $1.2350     +0.53%         +3.49%      +1.2420     +1.2277
 Dollar/Yen       JPY=        107.0500       107.8200    -0.71%         -4.99%      +107.8900   +106.7300
 Euro/Yen         EURJPY=     132.94         133.17      -0.17%         -1.66%      +133.3500   +131.6200
 Dollar/Swiss     CHF=        0.9302         0.9346      -0.47%         -4.53%      +0.9374     +0.9300
 Sterling/Dollar  GBP=        1.3976         1.3890      +0.62%         +3.43%      +1.3983     +1.3802
 Dollar/Canadian  CAD=        1.2551         1.2591      -0.32%         -0.21%      +1.2648     +1.2534
 Australian/Doll  AUD=        0.7895         0.7859      +0.46%         +1.21%      +0.7896     +0.7774
 Euro/Swiss       EURCHF=     1.1550         1.1547      +0.03%         -1.19%      +1.1561     +1.1499
 Euro/Sterling    EURGBP=     0.8882         0.8889      -0.08%         -0.01%      +0.8919     +0.8875
 NZ               NZD=        0.7343         0.7272      +0.98%         +3.63%      +0.7351     +0.7243
 Dollar/Norway    NOK=        7.8294         7.8702      -0.52%         -4.60%      +7.9515     +7.8292
 Euro/Norway      EURNOK=     9.7211         9.7248      -0.04%         -1.29%      +9.7663     +9.7009
 Dollar/Sweden    SEK=        7.9908         8.0261      +0.09%         -2.57%      +8.1055     +7.9877
 Euro/Sweden      EURSEK=     9.9237         9.9152      +0.09%         +0.86%      +9.9649     +9.8767


 (Reporting by Kate Duguid; Editing by Andrew Hay and Rosalba
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