US dollar retreats from one-month peak tied to upbeat US data

[NEW YORK] The US dollar was flat on Wednesday as investors took profits after reaching a one-month high early in the session versus a group of currencies as US data showed robust growth in retail sales and consumer prices in January.

The greenback had been on track for an 11th consecutive day of gains but it retreated as US Federal Reserve Chair Janet Yellen, in her second day of economic testimony before Congress, offered no additional insight on the timing of the central bank's next rate hike.

On Tuesday, Ms Yellen hinted more rate increases were on the way as the jobs market has improved and inflation has shown signs of nearing the Fed's 2 per cent goal.

She cautioned the number of rate hikes partly hinges on the impact from possible tax cuts, infrastructure spending and looser regulation from US President Donald Trump and the Republican-controlled Congress.

Other Fed officials echoed Ms Yellen's view of higher rates.

Philadelphia Federal Reserve Bank President Patrick Harker reckoned three rate hikes were appropriate this year, while Boston Fed President Eric Rosengren suggested an even more aggressive pace of rate increases may be needed.

"With the timing of rate hikes, there is some hesitation in the market," said Sebastien Galy, currency strategist at Deutsche Bank in New York.

The US dollar index, which measures the currency against its six major peers, was flat at 101.21. It had rallied to a session high of 101.76, its highest since Jan 12 as data showed a stronger-than-forecast 0.4 per cent increase in retail sales in January and a 0.6 per cent jump in consumer prices last month, their biggest gain in nearly four years.

"There was not enough momentum so people are taking some profits," Mr Galy said.

The futures market implied traders have priced in only a 27 per cent chance of a rate increase at the Fed's March 14-15 policy meeting and less than a 50 per cent chance the Fed would raise rates three times in 2017, according to the CME Group's FedWatch programme.

Not all US data were encouraging with industrial output and a gauge on home builder sentiment taking unexpected spills.

The euro rebounded from a one-month low against the greenback, last up 0.1 per cent at US$1.0583, while the US dollar hovered near a two-week high versus the yen, last at 114.33 yen.

REUTERS