NEW YORK: The dollar weakened on Wednesday after US consumer price inflation matched economists’ expectations in July, easing concerns that a hot reading could reinvigorate expectations for a near-term interest rate hike.
In the 12 months through July, the CPI advanced 3.4 percent after rising 3.5 percent in June. Core CPI increased 2.5 percent in the 12 months through July after climbing 2.6 percent in June.
Traders have pared bets on a rate increase at the Federal Reserve’s September 15-16 meeting since Friday’s jobs report showed employers unexpectedly shed jobs in July. Fed funds futures traders are now pricing in 40 percent odds of a September rate hike, down from 44 percent before Wednesday’s data and from 55 percent a week ago.
“I thought that after the soft jobs data on Friday, that the dollar would stay soft because of the expectations of the soft CPI. The dollar really didn’t go anywhere. If anything, it was a bit firmer than I expected,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
“But we are getting a little bit of a weaker dollar after the CPI. It looks like the market may have downgraded very slightly the odds of a September rate hike,” Chandler said.
Oil prices rose in volatile trade on Wednesday after attacks on two ships reinforced worries about disruptions to Middle East supplies and as talks to end the Iran war hit an impasse.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.12 percent to 99.69, with the euro up 0.12 percent at USD1.1554.
The Japanese yen strengthened 0.3 percent against the greenback to 158.84 per dollar. It has pared gains that were made during the joint intervention in late July by US and Japanese authorities to strengthen the Japanese currency.