Dollar Dips after Fed Calms U.S. Inflation Jitters

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The U.S. dollar edged lower against major currencies on Friday as risk appetite recovered across markets, after Federal Reserve officials helped calm jitters this week about accelerating U.S. inflation.

The greenback, seen as a safe haven in times of market volatility, was down a third of a percent against a basket of currencies, retracing some of its earlier gains on Wednesday after data showed a surprise surge in consumer prices.

U.S. consumer prices increased by the most in nearly 12 years in April on booming demand.

Federal Reserve officials have played down expectations of tighter policy, stressing price rises from the reopening of the economy should be temporary.

Global stocks also edged higher, snapping a threeday rout.

The foreign exchange market has continued to stabilize overnight after absorbing the shock of the much higher US CPI… helped by the rebound in global equity markets, analysts at MUFG said in a note.

A slew of more U.S. data is due later on Friday, including retail sales and industrial production, likely to give further clues about the extent of the economic recovery.

The euro was among the gainers against the dollar on the day, up 0.4 at 1.21265.

Ulrich Leuchtmann, head of FX and commodity research at Commerzbank, said in a note he believed U.S. inflation fears had led to the single currency being undervalued.

There is no rational argument to underpin why EURUSD trades below the levels seen on Wednesday morning considering the reaction…

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