WASHINGTON (dpa-AFX) - The U.S. dollar suffered one of its steepest slides in several months on Tuesday after data showing a bigger than expected drop in the nation's inflation raised hopes the Federal Reserve will keep interest rate unchanged in coming months.
U.S. treasury yields dropped following the inflation data, with the two-year yield falling to less than 4.85%.
Data from the Labor Department showed that inflation slowed to 3.2% in October from 3.7% in September. Economists had expected the pace of growth to decelerate to 3.3%.
Core consumer prices were up by 4% compared to the same month a year ago. The core CPI was expected to come in unchanged from 4.1% in the previous month.
On a monthly basis, the CPI was flat in October after climbing by 0.4% in September. Economists had expected consumer prices to inch up by 0.1%.
Excluding food and energy prices, core consumer prices edged up by 0.2% in October after rising by 0.3% in September. Core prices were expected to rise by another 0.3%.
With inflation cooling, markets now price in a 94.8% probability that the Fed will leave interest rates unchanged at its meeting in December.
The dollar index dropped to 103.99 and recovered slightly to 104.09, still down nearly 1.5% from the previous close.
Against the Euro, the dollar weakened to 1.0878 from 1.0698. The dollar is down sharply against Pound Sterling at 1.2499.
Against the Japanese currency, the dollar has eased to 150.38 yen a unit. The dollar is trading at 0.6507 against the Aussie, giving up more than 2%.
The dollar has dropped against Swiss franc at CHF 0.8891 from CHF 0.9017, and against the Loonie, it has declined to C$ 1.3691 from C$1.3808.
The Labor Department is scheduled to release a separate report on producer price inflation in the month of October on Wednesday.
Economists expect producer prices to inch up by 0.1% in October after climbing by 0.5% in September, while the annual rate of growth is expected to slow to 1.9% from 2.2%.
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