Thursday, February 18, 2010

Dollar strengthens as inflation rate rises

NEW YORK, Feb. 18 (Xinhua) -- The dollar extended gains on Thursday as wholesale prices increased more than expected last month.

The U.S. Labor Department reported that the producer price index for finished goods rose a seasonally adjusted 1.4 percent in January on the back of higher energy costs, much higher than analysts had expected. The core PPI, which excludes volatile energy and food prices, rose 0.3 percent, also higher than the expectation of 0.1 percent.

The Fed has left key interest rates at a record low levels as risk of inflation was kept in check. Rising wholesale inflation may weigh on Fed's decision on when to start tightening credit.

The latest statement from Fed, which was released after market closing on Thursday, said the central bank decided to increase the overnight loan rates it charges banks by 25 basis points to 0.75 percent.

The dollar was boosted as speculation of higher interest rates lured more investors.

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