US dollar drops after inflation data, jobless claims

THE US dollar fell on Thursday (Aug 10) after data showed American consumer prices rose moderately last month, while initial jobless claims gained in the latest week, reinforcing expectations that the Federal Reserve will not raise interest rates at the next policy meeting.

The US dollar index was last down 0.5 per cent at 102.01, while the euro rose 0.6 to US$1.1040.

The yen gained immediately against the greenback following the release of the US data, only to reverse course and slip 0.3 per cent lower to 144.20. The closely watched 145 per US dollar level is still in reach if losses extend. The last time it reached that mark was at the end of June.

The Japanese currency also set fresh session lows against the euro, falling as much as 0.8 per cent to 158.96.

“The fact that it’s breaking out now is a function of a reduction in bond volatility and event-risk out of the way until Jackson Hole, so there is a carry element to it,” said Brad Bechtel, a foreign-exchange strategist at Jefferies. He expects the yen to fall to 160 against the euro, “and then we’ll have to see”.

The consumer price index (CPI) rose 0.2 per cent last month, matching the gain in June, the Labor Department said on Thursday. The CPI climbed 3.2 per cent in the 12 months through July, up from a 3.0 per cent rise in June, which was the smallest year-on-year gain since March 2021.

Excluding the volatile food and energy categories, the CPI gained 0.2 per cent in July. This was the same as the increase in June.

In the 12 months through July, the core CPI grew 4.7 per cent, after rising 4.8 per cent in June.

“Markets are doubling down on ‘soft landing’ bets this morning after US consumer inflation slowed as expected, reducing the need for further monetary tightening from the Federal Reserve,” wrote Karl Schamotta, chief market strategist at Corpay, in a research note after the data’s release.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 248,000 for the week ended Aug 5.

Economists had forecast 230,000 claims for the latest week.