US Dollar Plunges to Three-Months Low As Inflation Eases

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A key indicator of the US dollar’s performance plummeted to a three-month low on Tuesday after wholesale inflation data strengthened speculation that the Fed may bring down the size of interest rates hikes as prices cool. 

According to the Bureau of Labor Statistics, the Producer Price Index soared by 8% in October from a year ago, slower than the 8.3% rate estimated by economists surveyed by Bloomberg. The PPI was down from the 8.4% surge clocked in September. Comerica said the latest PPI report was another strong evidence that businesses were losing pricing power in a cooling economy.

“Softer US inflation expectations are adding further fuel to the fire of dollar weakness, which was widely welcomed across global currencies last week and has now found encouragement to continue into this trading week,” Jameel Ahmad, chief investment strategist MENA at Alpari, told Insider in emailed comments. 

The US Dollar Index slumped by as much as 1.2% to 105.34, the lowest print since August 11. The index, which tracks moves against the euro, the Japanese yen, the British pound, and three other currencies, later cut the loss to 0.3%.