Dollar 'on the front foot' as US CPI report reveals decade high

The US dollar is likely to remain "on the front foot" alongside the biggest gain in US CPI in nearly a decade, analysts have said.

"We have seen the biggest gain in US CPI since September 2008, coming out at 2.9% y/y.

"This will keep the US dollar on the front foot, with the dollar index trading above 96.00," TreasuryONE said on Friday afternoon.

US consumer prices jumped by the most in almost a decade in July, Bloomberg reported, strengthening the case for the Federal Reserve to keep raising interest rates gradually.

On Friday, a Labor Department report showed that the core measure of the CPI – which excludes food and fuel – rose 2.4% from a year earlier, its largest increase since September 2008.

From the previous month, both the main CPI Index and the core rate rose 0.2%, in line with expectations, Bloomberg added.

'The panic has really set in now'

Meanwhile, the rand broke R14/$ for the first time in 2018 on Friday.

"USDZAR has just broken R14.00 on the back of Turkey still under massive pressure. Turkey has lost 14% on the currency today and 25% over the last week," TreasuryONE added, noting USDZAR was trading 5% weaker in the past week.

"We need to be very cautious in this market."

The rand extended its drop after US President Donald Trump announced higher tariffs on Turkish steel and aluminum imports. The move came on the heels of an address by Turkish President Recep Tayyip Erdogan that failed to reassure global markets.

"The rand has been caught up in the maelstrom," Per Hammarlund, chief emerging-market strategist at SEB SE in Stockholm, told Bloomberg.

Hammarlund predicted the currency would hit 14.50 in the short term.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

ZAR/USD
16.81
(-0.26)
ZAR/GBP
21.34
(-0.12)
ZAR/EUR
19.02
(-0.13)
ZAR/AUD
11.73
(-0.21)
ZAR/JPY
0.15
(+0.60)
Gold
1681.70
(+0.13)
Silver
17.39
(+0.17)
Platinum
815.55
(+0.35)
Brent Crude
41.88
(+5.78)
Palladium
1949.00
(+0.59)
All Share
54722.38
(+2.85)
Top 40
50199.80
(+2.79)
Financial 15
11467.53
(+4.66)
Industrial 25
74264.52
(+2.52)
Resource 10
49969.31
(+2.29)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
20% - 217 votes
I am taking a hit, but should be able to recover in the next year
26% - 285 votes
My finances have been devastated
29% - 323 votes
It's still too early to know what the full effect will be
25% - 282 votes
Vote