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US Dollar is Collapsing

The U.S. dollar suffered substantial losses on Wednesday after the U.S. consumer price index (CPI) for June showed the rate of inflation slowing to the lowest level since 2021.

The dollar index, which measures the greenback against six major peers, decreased 1.19 percent to 100.5220 in late trading, hitting its lowest in more than a year, which is also its largest daily percentage loss since early February.

The U.S. annual inflation slowed to 3 percent last month, the smallest annual pace since March 2021, according to the latest CPI released Wednesday by the U.S. Bureau of Labor Statistics. Core inflation, which excludes volatile food and energy prices, fell to 4.8 percent annually, below a consensus projection of 5 percent.

“The dollar selling off across the board after today’s soft U.S. inflation report intensified bets that the Federal Reserve’s rate hike cycle may soon be nearing an end,” said Matthew Ryan, head of market strategy at global financial services firm Ebury.

However, Federal Reserve Bank of Richmond President Thomas Barkin said backing off too soon on rates would require the Fed to do even more in the future, since the U.S. inflation rate is still too high.

Neel Kashkari, Minneapolis Federal Reserve president, also said that banks need to be ready for entrenched inflation.

In late New York trading, the euro increased to 1.1137 dollars from 1.0999 dollars in the previous session, and the British pound was up to 1.2991 dollars from 1.2928 U.S. dollars in the previous session.

The U.S. dollar decreased to 1.3192 Canadian dollars from 1.3239 Canadian dollars in late New York trading, after the Bank of Canada raised its key interest by another 25 basis points to 5 percent on Wednesday and resumed its rate hikes in June.

The U.S. dollar bought 138.3180 Japanese yen, lower than 140.4630 Japanese yen of the previous session.

The greenback also hit its lowest against the Swiss franc since early 2015, as it decreased to 0.8670 Swiss francs from 0.8799 Swiss francs on Wednesday, and down to 10.3800 Swedish Krona from 10.6696 Swedish Krona. ■

People shop at an Outlets in San Francisco Bay Area, California, the United States, July 12, 2023. The U.S. dollar suffered substantial losses on Wednesday after the U.S. consumer price index (CPI) for June showed the rate of inflation slowing to the lowest level since 2021.

The U.S. annual inflation slowed to 3 percent last month, the smallest annual pace since March 2021, according to the latest CPI released Wednesday by the U.S. Bureau of Labor Statistics. (Photo by Li Jianguo/Xinhua)

Customers order food at an Outlets in San Francisco Bay Area, California, the United States, July 12, 2023. The U.S. dollar suffered substantial losses on Wednesday after the U.S. consumer price index (CPI) for June showed the rate of inflation slowing to the lowest level since 2021.

The U.S. annual inflation slowed to 3 percent last month, the smallest annual pace since March 2021, according to the latest CPI released Wednesday by the U.S. Bureau of Labor Statistics. (Photo by Li Jianguo/Xinhua)

A woman shops at an Outlets in San Francisco Bay Area, California, the United States, July 12, 2023. The U.S. dollar suffered substantial losses on Wednesday after the U.S. consumer price index (CPI) for June showed the rate of inflation slowing to the lowest level since 2021.

The U.S. annual inflation slowed to 3 percent last month, the smallest annual pace since March 2021, according to the latest CPI released Wednesday by the U.S. Bureau of Labor Statistics.

Shayne Heffernan

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.