Dollar Resurgence Amidst Fed Independence Debate

The U.S. dollar neared a one-month high following CPI data aligning with expectations, suggesting the Federal Reserve might not change interest rates despite White House pressure. Support for Fed Chair Powell remains strong. Consumer prices in the U.S. rose 0.3% in December, solidifying these expectations.

The U.S. dollar edged closer to a month-high in Wednesday's early Asian trade following Consumer Price Index (CPI) data that aligned with expectations. This development has firmed up market anticipation that, despite pressures from the White House, the Federal Reserve will likely hold interest rates steady later this month.

The dollar index, tracking the greenback against six major currencies, rose 0.3% to 99.18, retracing Monday's losses after President Donald Trump threatened Fed Chair Jerome Powell with a criminal charge. Global financial leaders voiced their support for Powell, emphasizing the crucial independence of the Federal Reserve.

Consumer prices in the U.S. registered a 0.3% increase in December, driven by higher rents and food costs, as distortions from the earlier government shutdown unwound. This supported the notion that interest rates will remain unchanged, with Fed funds futures reflecting a 95.6% likelihood of such an outcome.

(With inputs from agencies.)