© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Joice Alves

LONDON (Reuters) -The dollar rose to a fresh three-month high against major peers as traders pushed back bets for a Federal Reserve interest rate cut following surprisingly hot U.S. inflation figures.

Since data Tuesday showed the U.S. consumer price index (CPI) in January gained 3.1% from a year earlier, versus an expected 2.9% rise, money markets have priced in no Fed cut in March and a 53% chance of a cut in June, according to ME Group.

The , which measures the U.S. currency against six major peers, traded 0.05% higher at 104.91, having touched a fresh three-month high of 104.97.

“Hot U.S. January CPI has closed the door for a March Fed rate cut. While PCE data will be more important, the debate has shifted to May or June for the start of the Fed’s easing cycle, unless banking risks escalate,” said Saxo’s Head of FX Strategy, Charu Chanana.

“This has made dollar strength more durable as risks of SNB (Swiss National Bank) and ECB (European Central Bank) rate cuts ahead of the Fed could gain traction.”

UK INFLATION

Against the British pound, the dollar rose 0.35% to $1.2548, briefly touching a eight-day high after data showed UK inflation did not accelerate in January as expected. This may relieve some of the pressure on the Bank of England (BoE) to keep rates where they are for longer.

UK inflation stood at an annual rate of 4.0% in January, unchanged from December. Economists polled by Reuters had forecast an increase to 4.2%.

“Base effects should now set up a very sharp fall in the annual inflation rate in the next four months,” said Michael Metcalfe, Head of Macro Strategy at State Street (NYSE:) Global Markets.

“This may yet be enough based on January’s benign reading to get the inflation rate near enough to target to allow the BoE to begin its easing cycle in June.“

Money markets see a 51% chance of a BoE rate cut in June and 75% chance of one in August, according to LSE Group data.

YEN WATCH

Meanwhile, the dollar weakened against the yen after top Japan’s currency officials warned against what they described as rapid and speculative yen moves.

“We are watching the market even more closely,” Japanese Finance Minister Shunichi Suzuki told reporters. “Rapid moves are undesirable for the economy.”

Asked whether authorities could intervene in the currency market, Suzuki left his office without a word.

Earlier, Japan’s top currency diplomat Masato Kanda said the nation would take appropriate actions on forex if needed.

The dollar fell 0.1% against the yen to 150.60, and was not too far from a three-month high reached against the Japanese currency on Tuesday. The dollar has added about 10 yen in price since the start of this year.

Japan intervened in the currency market three times in 2022 when the yen plunged to 32-year lows near 152 yen to the dollar, conducting rare dollar-selling, yen-buying intervention.

Elsewhere, the euro was little moved after a slew of euro zone economic data. It was down 0.06% at $1.0702, after briefly dipping to a fresh three-month low of $1.0695.

Euro zone employment rose by 0.3% quarter-on-quarter and by 1.3% year-on-year in the fourth quarter. According to a Reuters poll, employment had been expected to rise 0.2% quarter-on-quarter and 1.1% year-on-year.

Economic growth in the region was flat in the last three months of 2023 against the previous quarter and up 0.1% against the same period of 2022.

Leading cryptocurrency bitcoin rose 3.1% to 51,230, trading near its highest level since late December 2021.

It has surged 34% from a low on Jan. 23.