Dollar Stalls as Fed Hike Bets Pared on Benign US Inflation Data
The US dollar's advance stalled on Thursday after the release of a benign US inflation reading that led traders to reduce their bets for a near-term Federal Reserve interest rate hike.
The greenback was little changed against the yen in Asia's afternoon, but remained on course to gain about 1% this week as markets bought back the currency pair following recent joint US-Japan intervention that saw it plummet to a three-month low.
US consumer prices increased 0.1% in July, in line with economists' expectations, leading money markets to reduce the odds of a September rate hike to 40%, down from 54% a week ago, according to CME Group's FedWatch.
Currency strategist Michael Wan at MUFG said the primary dilemma for the Fed now lies in weighing inflation risks against a softening labor market, particularly after the weaker-than-expected July payrolls report released last Friday.