Dollar Steady Despite Dovish PPI Report and Reduced Safe-Haven Demand

The US dollar index (DXY00) remained relatively stable on Thursday despite the release of a dovish US PPI report, which decreased the likelihood of a Fed rate hike in September to 35% from 40% on Wednesday.

The 10-year T-note yield fell by 5 basis points, reducing the dollar's interest rate differentials and contributing to its downward pressure. The absence of new military attacks by the US or Iran in the Persian Gulf also reduced safe-haven demand for the dollar.

Market concerns about the Middle East were somewhat alleviated by news reports suggesting that the Trump administration is pivoting towards using economic pressure on Iran rather than new military strikes. However, there has been no progress between the US and Iran regarding an agreement to reopen the Strait of Hormuz.