Dollar rises following red-hot U.S. inflation

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In this photo illustration, 2, 50 and 100 dollar bills are seen displayed.
Igor Golovniov | LightRocket | Getty Images

The U.S. dollar rose on Tuesday, hitting a fresh high since May 2020 as key inflation data reinforced bets of aggressive monetary tightening and signaled to investors inflation could be at its peak.

Following the inflation data, which indicated the consumer price index jumped 8.5% in March, the dollar index touched a nearly two-year high above 100.33. March's inflation data also showed core CPI rise 6.5% year-over-year, while month-to-month CPI came in lighter than expected.

"USD remains supported due to the Fed's (Federal Reserve) active monetary policy, but a lot has been priced in as regards monetary policy so that USD is probably going to find it increasingly difficult to appreciate further," said You-Na Park-Heger, FX Analyst at Commerzbank.

Meanwhile, the euro fell 0.49% to $1.083, after surging in the previous day to $1.09550 on the news that incumbent President Emmanuel Macron beat far-right challenger Marine Le Pen in the first round of presidential voting.

The dollar also gained on the offshore Chinese yuan, reaching a two-week high of 6.390 before softening.

As investors digested the inflation data, the yield on benchmark 10-year notes dropped more than 5 basis points to 2.72% after hitting 2.8360%, its highest since December 2018.

Sterling dropped 0.24% to $1.2998 after UK employment data showed the jobless rate slipped further below its level immediately before the coronavirus pandemic, underscoring the risk of inflation pressure in the labor market that has the Bank of England on alert.