Dollar steady after tame US inflation report, yen recovery in focus
Dollar/yen was 0.23 per cent firmer at 154.29 while the euro was up 0.12 per cent at US$1.0857
THE dollar eased fractionally along with Treasury yields after the release of US price data that showed little worrisome inflation that would cause the Federal Reserve to rethink moving to a less restrictive monetary policy in the coming months.
The Commerce Department’s personal consumption expenditures (PCE) price index nudged up 0.1 per cent in June, as expected, after being unchanged in May, underscoring an improving inflation environment that potentially positions the Federal Reserve to begin cutting interest rates in September.
Year over year, the PCE price index climbed 2.5 per cent after rising 2.6 per cent in May, also in line with forecasts by economists polled by Reuters. The Fed closely tracks the PCE price measures for monetary policy, and subsiding inflation pressures could help officials meeting next week gain confidence that inflation is moving toward the US central bank’s 2 per cent target.
Meanwhile, the yen has dominated the currency markets this month after surging to a near three-month high of 151.945 per dollar on Thursday (Jul 25). It started the month at a 38-year low of 161.96 before Bank of Japan currency intervention and expectations that the Bank of Japan would deliver a hawkish policy tweak at its meeting next week flushed out yen carry-trade shorts.
Dollar/yen was 0.23 per cent firmer at 154.29. The euro was up 0.12 per cent at US$1.0857.
The dollar index, which measures the greenback against a basket of six currencies including the yen and the euro, was unchanged at 104.33 having been up 0.08 per cent before the data.
Sterling strengthened 0.12 per cent to US$1.2866.
The yield on benchmark US 10-year notes fell 3.1 basis points, while two-year note yields, which typically moves in step with interest rate expectations, fell were down 3.1 basis points after the report.
The Federal Open Market Committee meets July 30 and 31, the same days as the BOJ. It is expected to hold borrowing costs steady, but traders continue to bet the Fed will cut at its next meeting in September and see up to two more rate cuts this year. REUTERS
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