Dollar rebounds on high US import prices

By Herbert Lash and Harry Robertson 

An employee of a foreign exchange shop counts U.S. dollar banknotes from behind a glass booth in Karachi, Pakistan September 7, 2023. REUTERS/Akhtar Soomro/File photo Purchase Licensing Rights

NEW YORK/LONDON, May 16 (Reuters) - The dollar rose on Thursday after data showed U.S. import prices increased 0.9% last month, a jump that raised concerns the Federal Reserve's fight to tame inflation is not yet done and could delay plans for policymakers to cut interest rates.

Economic data this week offered the U.S. central bank good news, but policymakers haven't openly shifted their views on the timing of rate cuts many investors believe will start this year.

The jump in the price index for U.S. imports in April was the largest one-month increase since it rose 2.9% in March 2022, the Bureau of Labor Statistics said. Prices for U.S. imports last declined on a monthly basis in December, the BLS said.

The market also was grappling with a drop in the number of Americans filing new claims for unemployment benefits last week that pointed to underlying strength in the U.S. labor market. A strong economy could keep rates higher for longer.

"The market is, of course, very sensitive to signs of inflation from wherever it may come, and the import price series that we got today was meaningfully stronger than expected," said Brain Daingerfield, head of G10 FX strategy at NatWest Markets in Stamford, Connecticut.

"The Fed wants to see consistent progress in more than just one point. The number we got yesterday - the CPI - was not as bad as feared," he said. "But I don't think it was enough to materially change the market's outlook for the Fed and that's reflected in the way that the dollar has bounced back today."

The dollar rebounded from a sharp decline against all major currencies on Wednesday when data showed U.S. inflation slowing to 0.3% in April from a month earlier.

The dollar index , which tracks the U.S. currency against six peers, rose 0.27% to 104.47 after a 0.75% slide on Wednesday.

The slowing of consumer prices, after a stall in the first three months of the year, prompted markets to price in the likelihood that the Fed would cut rates twice this year, with the first coming as early as September.