Dollar Advances Against Euro, Yen Before U.S. Inflation Report

By Kim-Mai Cutler

Feb. 20 (Bloomberg) -- The dollar rose against the euro and yen before a government report that may show U.S. inflation accelerated last month, giving the Federal Reserve less reason to lower interest rates. The dollar rose against 13 of the 16 most-active currencies tracked by Bloomberg today as traders pared bets the Fed will reduce its benchmark rate by three-quarters of a percentage point next month. Crude oil traded below yesterday's record $100.10 a barrel in New York. The U.S. dollar index traded on ICE Futures in New York, which tracks the currency against its six major counterparts, rose 0.2 percent to 76.1. ``There's a distinct possibility inflationary pressures could grow and grow,'' said Simon Derrick, the London-based head of currency strategy at Bank of New York Mellon Corp. ``There is a risk we could see a high CPI number today.'' The U.S. currency rose to $1.4658 by 7:10 a.m. in New York, from $1.4725 yesterday. Against the yen, it climbed to 107.87 from 107.78. The euro fell 0.4 percent to 158.11 yen. Consumer prices rose at an annual rate of 4.2 percent in January from a year earlier, compared with 4.1 percent the previous month, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department will release the report at 8:30 a.m. today in Washington. Interest rate futures on the Chicago Board of Trade show a 4 percent chance the Fed will lower rates by three quarters of a percent to 2.25 at its March 18 meeting, down from 32 percent odds a week ago. The remaining odds are for a half-point reduction.