The dollar index (DXY00) on Tuesday gave up most of an early advance and rose by only +0.01%.  An easing of contagions concerns from the U.S. banking turmoil sparked a rally in stocks that curbed the liquidity demand for the dollar.  Higher T-note yields Tuesday limited losses in the dollar.

Tuesday’s U.S. consumer price news was close to expectations and neutral for the dollar after Feb CPI rose +0.4% m/m and +6.0% y/y, right on expectations with the +6.0% y/y gain, the smallest year-on-year increase in 17 months.  Also, Feb CPI ex-food and energy eased to +5.5% y/y from +5.6% y/y in Jan, right on expectations and the slowest pace of increase in 14 months.

EUR/USD (^EURUSD) on Tuesday rose by +0.05% and posted a 1-month high.  The euro Tuesday recovered from early losses and moved slightly higher after the dollar index gave up most of an early advance.  EUR/USD also has support on expectations for the ECB to raise interest rates by +50 bp at Thursday’s policy meeting.

Tuesday’s Eurozone economic news was bearish for EUR/USD after Italy Jan industrial production fell -0.7% m/m, weaker than expectations of -0.4% m/m.

USD/JPY (^USDJPY) on Tuesday rose by +0.63%.  The yen Tuesday was under pressure from a sharp decline in Japanese government bond yields after the 10-year JGB bond yield fell to a 6-3/4 month low of 0.177%.  Also, higher T-note yields Tuesday weighed on the yen. 

April gold (GCJ3) on Tuesday closed down -5.60 (-0.29%), and May silver (SIK23) closed up +0.117 (+0.53%).  Precious metals Tuesday settled mixed, with silver climbing to a 2-1/2 week high.  An easing of contagion risk from the U.S. banking crisis pushed stocks and bond yields higher Tuesday and weighed on precious metal prices.  Also, Tuesday’s as-expected U.S. Feb CPI report has reduced the demand for gold as an inflation hedge.