Dollar Falls on Dovish PPI Report, Odds of September Rate Hike Plummet

The US dollar index (DXY00) fell by 0.09% on Wednesday after a dovish US PPI report caused the odds of a Fed rate hike in September to drop to 35%, down from 40% on Tuesday and 51% on Monday.

The report showed that the July US final-demand PPI was unchanged month-over-month but increased by 4.7% year-over-year, which was weaker than market expectations of +0.2% m/m and +4.9% y/y.

The decline in interest rate differentials also contributed to the dollar's weakness, with the 10-year T-note yield falling by 7 basis points.