Dollar edges higher as Fed debate over inflation continues



* Graphic: World FX rates Link

By Karen Brettell

NEW YORK, June 23 (Reuters) - The dollar ended higher on Wednesday as two Federal Reserve officials said that a period of high inflation in the United States could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures.

Atlanta Fed President Raphael Bostic said with growth surging to an estimated 7% this year and inflation well above the Fed's 2% target, he now expects interest rates will need to rise in late 2022.

Both Bostic and Fed Governor Michelle Bowman on Wednesday said that while they largely agree recent price increases will prove temporary, they also feel it may take longer than anticipated for them to fade.

The dollar jumped after the Fed surprised markets on June 16 by saying that policymakers are forecasting two interest rate hikes in 2023.

But Powell on Tuesday said that prices are rising due to a "perfect storm" of rising demand for goods and services and bottlenecks in supplying them as the economy reopens from the pandemic and that those price pressures should ease on their own.

“Dollar gains have faded after Mr. Powell downplayed higher inflation lasting for very long,” said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.

That said, “if we see signs of inflation pushing further higher, I think that could go some way in stirring inflation jitters all over again and putting the focus on Fed policy,” Manimbo said.

The dollar index USD= gained 0.06% to 91.798, but is holding below two-month highs of 92.408 reached on Friday.

The dollar weakened earlier on Wednesday and hit a session low after data showed that sales of new U.S. single-family homes fell to a one-year low in May as the median price of newly built houses soared amid expensive raw materials, including framing lumber.

Other data showed that a measure of U.S. factory activity climbed to a record high in June.

Producer price inflation data on Friday is this week’s U.S. economic focus, with other releases including jobless claims on Thursday and consumer spending on Friday.

The euro EUR=EBS fell 0.11% to $1.1929.

Data on Wednesday showed that euro zone business growth accelerated at its fastest pace in 15 years in June following the easing of more lockdown measures.

The Japanese yen JPY=D3 also fell after data showed factory activity expanded at the slowest pace in four months in June.

The dollar gained 0.29% to 110.66 yen JPY=D3 , after earlier reaching 111.10 yen, the highest since March 2020.

Currencies correlated to the global economic cycle, including the Kiwi dollar and Norway's crown, outperformed on Wednesday.

Elsewhere, bitcoin was up around 2.78% on the day at $33,467 BTC=BTSP , after dropping to as low as $28,600 on Tuesday - its lowest since January.

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Currency bid prices at 3:01PM (1901 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

91.7980

91.7460

+0.06%

2.019%

+91.9000

+91.5090 Euro/Dollar

EUR=EBS

$1.1929

$1.1942

-0.11%

-2.37%

+$1.1970

+$1.1911 Dollar/Yen

JPY=D3

110.9600

110.6600

+0.28%

+7.44%

+111.0950 +110.6400 Euro/Yen

EURJPY=

132.35

132.14

+0.16%

+4.28%

+132.6900 +132.0400 Dollar/Swiss

CHF=EBS

0.9184

0.9183

+0.01%

+3.80%

+0.9200

+0.9154 Sterling/Dollar GBP=D3

$1.3964

$1.3946

+0.14%

+2.22%

+$1.4001

+$1.3924 Dollar/Canadian CAD=D3

1.2302

1.2308

-0.03%

-3.38%

+1.2328

+1.2253 Aussie/Dollar

AUD=D3

$0.7573

$0.7556

+0.23%

-1.56%

+$0.7599

+$0.7539 Euro/Swiss

EURCHF=

1.0955

1.0962

-0.06%

+1.37%

+1.0968

+1.0949 Euro/Sterling

EURGBP=

0.8540

0.8557

-0.20%

-4.44%

+0.8565

+0.8531 NZ

NZD=D3

$0.7041

$0.7021

+0.31%

-1.92%

+$0.7069

+$0.6998 Dollar/Dollar

Dollar/Norway

NOK=D3

8.5315

8.5395

-0.28%

-0.83%

+8.5610

+8.4800 Euro/Norway

EURNOK=

10.1774

10.1919

-0.14%

-2.77%

+10.2167

+10.1355 Dollar/Sweden

SEK=

8.4857

8.4752

+0.12%

+3.53%

+8.4970

+8.4568 Euro/Sweden

EURSEK=

10.1243

10.1120

+0.12%

+0.48%

+10.1395

+10.1088


Reporting by Karen Brettell; additional reporting by Saikat Chatterjee in London; editing by Jonathan Oatis and Marguerita Choy

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