Investing.com - The dollar rose to session highs against the yen and the euro on Tuesday, after data showed that the annual rate of U.S. inflation rose at the fastest pace since October 2008 in May.
USD/JPY was up 0.28% to 101.12 from 101.82 late Monday.
The pair was likely to find support at 101.59, the low of June 12 and resistance at 102.40.
The Labor Department reported that U.S. consumer prices rose at an annual rate of 2.1% last month, while prices were up 0.4% from a month earlier.
Market expectations had been for an annual increase of 2.0% and a monthly rise of 0.2%.
Rising inflation levels would give the Federal Reserve less leeway to keep interest rates on hold at record lows as the economic recovery continues to gain momentum.
Investors were looking ahead to the outcome of the Fed’s two-day policy meeting on Wednesday, as they awaited fresh indications on the timing of possible interest rate increases.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.22% to 80.73.
The euro was weaker against the dollar, with EUR/USD down 0.21% to 1.3544, holding above the four month trough of 1.3502 struck earlier this month.
The euro has weakened broadly since the European Central Bank announced stimulus measures earlier this month, in a bid to ward off deflation and spur growth in the euro zone.
Earlier Tuesday, a report showed that German economic sentiment deteriorated unexpectedly in June, reflecting the recent slowdown in the German economy after a strong start to the year.
The ZEW index of economic sentiment came in at 29.8 this month, down from 33.1 in May. It was the lowest reading since December 2012.
Elsewhere, the euro was slightly higher against the yen, with EUR/JPY inching up 0.08% to 138.32, holding above the four month low of 137.71 set late last week.