Dollar Hits Eight-Day High as US Data Lifts Rate Hike Bets

The US dollar rose to its highest level in eight days after new economic data from the Commerce Department showed a slight increase in inflation, boosting expectations of a Federal Reserve rate hike. The Personal Consumption Expenditures Price Index increased by 3.7% in the 12 months through July, unchanged from June and slightly above economists' estimates.

The reading kept the market's expectation for a Fed rate hike by year-end alive, but Westpac economist Ryan Wells noted that Chairman Kevin Warsh's speech at Jackson Hole will be the ultimate test of this expectation. The dollar index rose 0.21% to 99.13, its highest level since August 19.

Meanwhile, markets are waiting for a speech by Bank of Japan deputy governor Ryozo Himino, which could signal a rate hike in September. Money markets are pricing in an 87% chance of a BOJ rate hike next month, according to data from money market broker Totan Tanshi.