Yen falls broadly as CPI data lifts risk demand

By Lucia Mutikani

NEW YORK (Reuters) - The yen fell broadly on Wednesday as a benign U.S. consumer inflation report for April raised investors' appetite for risk and was seen giving the Federal Reserve flexibility to deal with an economic downturn.

The unexpectedly slower increase in the consumer price index (CPI) briefly caused traders to sell the dollar, but analysts said it did not alter market views the Fed's interest-rate-cutting campaign was almost over.

"The market looked at it as a positive for risky assets, namely that it takes a little bit of stress off the inflation outlook and gives the Federal Reserve more flexibility in terms of the economic outlook," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.

The dollar jumped to a session high of 105.44 yen, with U.S. stocks surging as worries eased about inflation. It was last trading at 105.22 yen, up 0.4 percent on the day.

The euro gained 0.4 percent to 162.69 yen, while sterling rose 0.5 percent to 204.67 yen. Against the yen, the Canadian dollar soared 0.6 percent to 104.89 yen.

RISK APPETITE BACK

"The more benign CPI also led to bonds getting bought back, bringing yields down. That's what drove the dollar/yen rate and we're looking at stocks pricing higher, bringing back risk appetite," said Dolan.

Consumer prices rose by 0.2 percent in April, less than the 0.3 percent gain Wall Street analysts expected. CPI rose 0.3 percent in March.