Dollar Index Rises Ahead of Critical CPI Test
The U.S. Dollar Index (DXY) rose to 99.08 on Thursday, up 0.27%, driven by a hotter-than-expected producer-price report, a surge in oil prices to $109, and a 10-year Treasury yield near 4.95%. The move was seen as a test for the dollar's strength ahead of Friday's Consumer Price Index (CPI) release.
The Bureau of Labor Statistics reported that final-demand producer prices increased 0.4% in August and 5.4% from a year earlier, with goods prices jumping 1.1%, led by a 4.2% increase in energy. The services sector rose a milder 0.1%. These numbers have implications for currencies, as a headline shock concentrated in energy can hurt growth but also makes it harder to justify an early Federal Reserve easing cycle.
Friday's CPI is the key decision point for dollar traders, with economists polled by Reuters expecting a 0.4% monthly increase in headline CPI and a 0.2% rise in the core measure. A core CPI increase above 0.2% would give dollar bulls a stronger argument, potentially pushing DXY to test its high of 99.199 and even the round level of 100.