Investing.com - The dollar extended its rally against the other major currencies on Wednesday after data showed that U.S. producer price inflation rose in December, while a separate report showed that manufacturing activity in the Empire state rose far more strongly than forecast in the current month.
EUR/USD hit session lows of 1.3585, the weakest since January 10 and was last down 0.60% to 1.3596.
The dollar strengthened across the board after data showed that U.S. producer price inflation rose at the strongest rate in six months in December.
Producer price inflation rose 0.4% last month, the biggest increase since June, recovering from a 0.1% decline in November and was 1.2% higher from a year earlier.
Core PPI was up 0.3% in December and rose 1.4% on a year-over-year basis, compared to expectations for a monthly increase of 0.1% and an annual gain of 1.3%.
A separate report showed that manufacturing activity in the Empire State expanded at the fastest pace since May 2012 this month.
The Federal Reserve Bank of New York said that its general business conditions index jumped to 12.51 in January from an upwardly revised 2.22 in December. Analysts had expected the index to rise to 3.75.
The strong data reinforced expectations that the U.S. economic recovery will continue to deepen going into this year and offset lingering concerns over last week’s surprising poor U.S. nonfarm payrolls report.
The common currency shrugged off a report showing that the euro zone’s trade surplus widened to EUR16.0 billion in November from a surplus of EUR14.3 billion in October, due to a decline in imports.
Elsewhere, Germany’s Federal Statistics Office said Wednesday the economy expanded by just 0.4% in 2013 after increasing by 0.7% in 2012, as the crisis in the euro zone acted as a drag on growth. Analysts had been expecting growth of 0.5%.
USD/JPY hit highs of 104.52, the strongest since January 10 and was last up 0.23% to 104.44. On Tuesday the pair rallied 1.1%, recovering from a one-month low of 102.84 struck on Monday after data showed that U.S. retail sales rose more than expected last month.
The dollar extended gains against the pound and the Swiss franc, with GBP/USD down 0.56% to 1.6346, and USD/CHF advancing 0.70% to 0.9088.
The Australian dollar extended its pullback from Monday’s one-month highs, with AUD/USD down 0.54% to 0.8916, while NZD/USD lost 0.32% to trade at 0.8354.
Elsewhere, USD/CAD edged down 0.09% to 1.0940, after rising as high as 1.0992 earlier, the strongest level since September 2009.
The Canadian dollar remained under heavy selling pressure after dire employment data last week cemented expectations that the Bank of Canada will stick to its dovish stance on interest rates.
The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.50% to 81.14.