FOREX-Dollar near 2-1 / 2-month lows as commodity gains fuel inflation concerns

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* Chart: global exchange rates tmsnrt.rs/2RBWI5E

LONDON, May 11 (Reuters) – Resource-oriented currencies, notably the Canadian dollar and the Aussie, consolidated their gains on Tuesday, as a rally in commodity prices strengthened their appeal, while the greenback held near multi-month lows amid mounting concerns over price pressures.

Soaring commodity prices have propelled the cost of raw materials from copper to iron ore to timber to record highs, raising fears that inflation may not be as transient as some believe, rates of US balance reaching multi-year highs.

The Australian dollar stabilized at $ 0.7827, sitting just below a two-month high on Monday. The Canadian dollar stabilized near an almost four-year high, while the New Zealand dollar comfortably perched at the February high.

But markets were trading broadly within narrow ranges amid expected U.S. consumer price figures on Wednesday, with traders worried that large numbers could prompt the Fed to back down on monetary policy support earlier than expected.

“The dollar could find short-term support tomorrow, if consumer prices surprise especially on the upside,” Commerzbank strategists said in a daily note.

The appearances later Tuesday of U.S. Federal Reserve members John Williams, at 2:30 p.m. GMT, and Lael Brainard, at 4:00 p.m. GMT, will be analyzed for clues as to the central bank’s thinking.

Against a basket of its main rivals, the dollar stabilized at 90.283, just above the February 25 low of 90.03 reached in the previous session.

“The big question is whether the Fed can be comfortable staying dovish,” said Moh Siong Sim, currency analyst at the Bank of Singapore. “If inflation rises more than the Fed expects … what will happen to the Fed then?”

Markets expect inflation in the United States to hit 3.6% year over year in April, due to the base effect of a pandemic year contraction.

Investors seem increasingly to disagree with policymakers over whether this kind of price growth will persist, and have raised the US five-year thresholds – a measure of inflation expectations – to 2.717% , a decade high, Monday.

Reporting by Saikat Chatterjee; Additional reporting by Stanley White in TOKYO and Tom Westbrook in SINGAPORE; Edited by Subhranshu Sahu



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