Khaberni -The dollar rose alongside U.S. Treasury yields, which in turn kept pressure on the yen, after the latest U.S. inflation report showed signs that President Donald Trump's tariffs were beginning to impact prices.
The rise in prices of various goods such as coffee and home furniture led to an increase in the inflation rate in June, with significant increases in prices of heavily imported goods.
This pushed both the dollar and Treasury yields higher, while investor expectations for interest rate cuts this year declined.
The dollar's leap was more pronounced against the yen, as the Japanese currency fell to a four-month low at 149.03 overnight. The dollar traded at 148.90 yen in the latest transactions.
Similarly, the euro and the British pound dropped, approaching their lowest levels in three weeks recorded in the previous session, trading at 1.1608 dollars and 1.3394 dollars, respectively.
Nathaniel Casey, an investment expert at Evelyn Partners, said that the rise in commodity prices in the United States "could be a sign that we are beginning to see some inflationary pressures from the tariffs," but it is too early to say this "definitively."
Casey added, "Although this inflation report does not signal a major danger, the rise in commodity prices and ongoing uncertainty about future tariff rates may make the Federal Reserve and (its chairman Jerome) Powell hesitant to want to cut interest rates."
Dealers expect an interest rate cut of about 43 basis points by December, having previously expected just over a 50 basis point cut at the start of the week.
U.S. Treasury yields remained high on Wednesday, with the standard 10-year Treasury yields rising to a month-high at 4.4950%.
This contributed to keeping the dollar supported against a range of currencies, hovering near a month-high at 98.60.
The Australian dollar rose 0.02% to 0.6517 dollars after falling 0.45% on Tuesday. The New Zealand dollar rose 0.17% to 0.5955 dollars.
Among the concerns of investors is also the possibility that Powell's successor might eventually be more inclined to cut interest rates, which could lead to higher prices.
Trump has criticized Powell for months for not cutting interest rates and has repeatedly urged him to resign. Trump said on Tuesday that the cost overrun in renovating the Federal Reserve's historic headquarters in Washington, totaling 2.5 billion dollars, could constitute grounds for dismissal.
Molly Schwartz, an analyst at Rabobank, said, "The additional unwanted attention on Powell has lent some credibility to the idea that we might see his early departure and an early nomination by Trump."
In the field of trade, Trump said on Tuesday that the United States would impose a 19% customs tariff on goods imported from Indonesia under a new agreement with it, indicating that more agreements are under negotiation.
He also said that letters will soon be sent notifying smaller countries of U.S. tariff rates, and that his administration will likely impose a tariff rate "just over 10%" on those countries.
