(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%. .DXY
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.
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Currency bid prices at 9:32AM (1332 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
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
ar
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/Dollar
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)