Dollar Mixed as Flat U.S. PPI Cools September Fed Rate-Hike Bets
NEW YORK — The U.S. dollar traded mixed on Thursday after softer-than-expected producer inflation data prompted investors to reduce expectations that the Federal Reserve will raise interest rates at its September meeting.
The U.S. Producer Price Index (PPI) was unchanged in July, compared with economists’ expectations for a 0.2% increase. The reading followed a revised 0.1% decline in June and came after consumer inflation data showed relatively limited price pressures during July.
Following the data, Fed funds futures indicated about a 35% probability of a September rate hike, down from 40% a day earlier and 55% a week ago.
The U.S. Dollar Index was little changed near 99.96, after briefly falling to 99.80 following the PPI release. The euro edged higher to around $1.1528, while sterling slipped to approximately $1.3481.
Yen Weakens Toward ¥160
The Japanese yen remained under pressure, weakening to around ¥159.48 per dollar. The currency has surrendered part of the gains generated by last month's joint U.S.-Japan intervention.
Investors are increasingly focused on whether the Bank of Japan will raise interest rates at its September meeting. Without stronger monetary tightening or more hawkish guidance, traders may continue testing the yen's weakness toward the psychologically important ¥160 level.
Oil and Inflation Remain Key Risks
Despite the softer U.S. inflation readings, markets remain cautious because oil prices and geopolitical tensions could renew inflationary pressures. Disruptions surrounding the Strait of Hormuz and fresh concerns over Middle Eastern energy infrastructure continue to keep energy markets volatile.
Meanwhile, U.S. jobless claims increased moderately, suggesting the labor market remains relatively stable despite recent employment weakness.
Attention now turns to U.S. retail sales data, which could provide the next major signal on the strength of the economy and influence expectations for the Federal Reserve's September decision.
For currency markets, the outlook remains highly sensitive to incoming inflation data, Fed policy expectations and the next steps from the Bank of Japan.