U.S. Markets

Dollar retreats from one-month peak tied to upbeat U.S. data

NEW YORK (Reuters) - The 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 U.S. data showed robust growth in retail sales and consumer prices in January.

United States one dollar bills are seen on a light table at the Bureau of Engraving and Printing in Washington in this November 14, 2014, file photo. REUTERS/Gary Cameron/Files

The greenback had been on track for an 11th consecutive day of gains but it retreated as U.S. 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, 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 percent goal.

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

Other Fed officials echoed 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 dollar index .DXY, 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 percent increase in retail sales in January and a 0.6 percent jump in consumer prices last month, their biggest gain in nearly four years.

“There was not enough momentum so people are taking some profits,” Galy said.

The futures market implied traders have priced in only a 27 percent chance of a rate increase at the Fed's March 14-15 policy meeting FFH7 and less than a 50 percent chance the Fed would raise rates three times in 2017 FFZ7, according to the CME Group's FedWatch program.

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

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

Additional reporting by Patrick Graham in London; Editing by David Gregorio and Diane Craft