Dollar steadies on ceasefire prospects, PPI eases pressure on Fed

HONG KONG: The dollar found its footing in early trading on Friday, after sliding to its weakest in a week as traders parsed reports that a ceasefire deal in the Middle ​East could be imminent.

Against the yen , the U.S. currency was up 0.1% at 160.07 yen. The ‌Australian dollar was down 0.1% at $0.7045, while its kiwi counterpart was down 0.1% at $0.5830.

The euro last bought $1.1576, holding near its strongest in a week after the European Central Bank’s first interest rate hike in three years on Thursday.

The British pound was flat ​at $1.3414.

“Markets reversed late in the US session after President Trump cancelled planned attacks on Iran, suggesting a ​deal could be signed as soon as this weekend,” analysts from Westpac wrote in ⁠a note to clients.

“The USD weakened on the latest developments, with the DXY lower and the AUD rising ​against the USD and other major currencies.”

Brent crude tumbled 1.6% to $88.94 a barrel as trading resumed in Asia, after ​President Donald Trump said on Thursday the United States and Iran could sign a peace deal as soon as this weekend that would reopen the Strait of Hormuz to shipping. Iran countered that it had not reached a final decision on an agreement.

Data on ​Thursday showed US producer prices increased more than expected in May, leading to the largest annual gain in 3-1/2 ​years as the Middle East conflict drove up the cost of energy products.

But traders found encouragement in the details of the ‌report.

“The ⁠more important core PPI reading, which typically feeds directly into core PCE inflation, came in at 4.9% year-on-year, well below the 5.4% expected,” said Tony Sycamore, market analyst at IG in Sydney, referring to the Federal Reserve’s preferred gauge of cost-of-living increases. “This, combined with the fall in energy prices, helped calm inflationary concerns.”

Expectations for the timing ​of the Fed’s next rate ​hike shifted back to ⁠December after the report. Fed funds futures now price in an implied 63.3% probability of a 25-basis-point hike at the U.S. central bank’s two-day meeting ending October 28, ​compared with an even chance a day earlier, according to the CME Group’s ​FedWatch tool.

The European ⁠Central Bank is now widely expected to lift interest rates again in September, according to LSEG data.

“The ECB delivered its first 25-basis-points hike since September 2023, with inflation and growth revisions hawkish at the margin,” analysts from Barclays wrote ⁠in a ​research note. “That said, it offered little guidance on if and when ​it will follow with more, though risks seemed skewed towards further action, barring a quick improvement in the inflation outlook.”

In cryptocurrencies, bitcoin edged ​up 0.2% to $63,460.05, while ether eked out a 0.1% increase to $1,672.55.