Dollar Slips as Bond Rally Overshadows Hot Inflation Data

The U.S. dollar weakened on Thursday, as a rally in government bonds offset stronger-than-expected inflation figures. The euro posted its best single-day gain in two months. Producer prices — a measure of what businesses pay for goods and services — rose more than economists expected last month. Normally, such data would lift the dollar by raising hopes of higher interest rates. This time, it did not. Instead, investors poured money into U.S. Treasuries, pushing bond yields lower. When yields fall, the dollar often loses its appeal to foreign investors seeking higher returns. The euro climbed sharply against the dollar, its strongest daily performance since early summer. Traders pointed to easing political concerns in Europe and a shift in rate expectations. The dollar's drop shows how bond markets can override inflation data. For now, investors appear more focused on the direction of interest rates than on one strong price report.