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Dollar Gains on Strong PPI Data; Loonie Slips as Oil Prices Slump – The dollar rose on Wednesday as U.S. bond yields continued to edge higher on hot inflation data, while a retreat in the loonie amid falling U.S. crude prices also boosted the greenback.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.33% to 98.65.

The Labor Department said its producer price index for final demand increased 0.1% last month, in line with economists' forecasts. In the 12 months through August, the PPI rose 1.8%, ahead of forecasts of 1.7%.

The core PPI, which excludes food and energy prices, rose 0.3% in August, more than the 0.2% rise forecast. The year-on-year rise was 2.3%, edging above estimates of 2.2%.

"The uptick in the pace of wholesale prices supports our general inflation view that a tight labor market and more generally a tight economy - excluding manufacturing - are beginning to deliver a modest pickup in underlying price pressures," Pantheon Macroeconomics said in a note.

The inflation data dimmed expectations somewhat that the Federal Reserve will cut rates aggressively at its meeting next week, boosting Treasury yields, with the 10-Year Treasury yield up about 2% to 1.735%.

The dollar also racked up gains against the loonie, with USD/CAD trading up 0.36% following a fall in oil prices despite a bigger-than-expected draw in U.S crude stockpiles.

The loonie started the day on the back foot amid added political uncertainty in Canada ahead of an election on Oct. 21.

Canadian Prime Minister Justin Trudeau's Liberal Party is expected to win, albeit with a small majority.

EUR/USD fell 0.31% to $1.101 ahead of the European Central Bank meeting Thursday, with many expecting the central bank to deliver fresh stimulus.

USD/JPY rose 0.21% to Y107.75 and GBP/USD fell 0.15% to $1.233

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