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Dollar slides vs yen after tepid US inflation data

Frank van den Bergh | E+ | Getty Images

The dollar fell against the yen on Thursday, snapping two days of gains, hurt by data showing benign U.S. inflation that should keep the Federal Reserve cautious in raising interest rates.

The greenback also fell from a two-week high against the euro following the U.S. inflation report, and also surrendered gains versus the Swiss franc. Despite a European Central Bank's monetary easing, the euro has remained resilient against the dollar, gaining nearly 4 percent so far this year.

The U.S. consumer price data offset an upbeat labor market report, showing a drop in U.S. jobless claims. U.S. consumer prices rose less than expected in March and underlying inflation slowed.

The consumer price index gained just 0.1 percent last month as a rebound in gasoline prices was partly offset by a drop in the cost of food.

"The (CPI) data should...leave the bar set high to a Fed rate hike in the months ahead which could keep in check meaningful gains for the dollar," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

In mid-morning trading, the dollar fell 0.15 percent against the yen to 109.26 yen, after earlier hitting a one-week peak of 109.54. The dollar is down 9.5 percent versus the Japanese currency so far this year.

Bank of Japan Governor Haruhiko Kuroda said in New York that the central bank was ready to expand monetary stimulus again if recent weaknesses in inflation expectations persist. He stressed there were "many ways" to do so to achieve his ambitious price target.

That should help keep the yen's gains in check.


Kuroda made the remarks ahead of a meeting of Group of 20 financial leaders in Washington, where currency policy is seen high on the agenda in the face of subdued global growth.

The euro was down 0.1 percent against the dollar at $1.1262, way below a six-month high of $1.1464 touched on Tuesday.

"While much of the world was sure that an increase to quantitative easing would send euro/dollar spiraling lower to that parity level, few anticipated that a dovish move from the Fed would actually offset all of that," said James Stanley, currency analyst at DailyFX in NewYork.