NEW YORK (Reuters) - The dollar trimmed losses against a basket of major currencies on Wednesday, after data showed an uptick in underlying inflation as well as a surprise rise in retail sales last month, cementing expectations for an interest rate hike in December.
Underlying U.S. consumer prices increased in October on the back of a pickup in rents and healthcare costs, bolstering the view that a recent disinflationary trend worrying the Federal Reserve probably had ended.
The Labor Department said on Wednesday that the core Consumer Price Index rose 0.2 percent in October after edging up 0.1 percent in September.
Other data showed an unexpected increase in retail sales last month.
“On the whole, it was generally a decent slew of data,” said Mazen Issa, senior FX strategist at TD Securities in New York.
“Underlying inflation seems to have stabilized for now and data has improved. I think that is enough for the Fed to deliver a hike next month,” he said.
Mazen, however, warned that upside for the dollar may be capped from here, barring a boost from the passage of the U.S. tax bill.
U.S. Senate Republicans on Tuesday linked repealing a key component of Obamacare to their ambitious tax-cut plan, raising new political risks and uncertainties for the tax measure that financial markets have been monitoring closely for months.
The dollar index .DXY, which measures the greenback against six rival currencies, was down 0.03 percent at 93.801. Before the release of the data, the index was down 0.3 percent on the day.
The euro was down 0.02 percent at $1.1794 against the greenback, after earlier rising as high as $1.186.
The euro has gained in recent days as investors grow optimistic about the single currency’s outlook with growing doubts about the prospects of the U.S. tax plan also underpinning gains.
Against the yen, the dollar was 0.46 percent lower.
“Investors are looking for a little bit of a safe haven,” said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.
Stocks around the world were down on Wednesday as weaker commodities weighed.
Japan is the world’s largest creditor nation and traders tend to assume Japanese investors would repatriate funds at times of crisis, thus pushing up the yen.
The Canadian dollar weakened to a one-week low against its U.S. counterpart as oil and stocks fell.
Reporting by Saqib Iqbal AhmedEditing by Chizu Nomiyama