Dollar Strengthens Amid Anticipation of Inflation Data

The US dollar strengthened in Asian trade on Wednesday as markets waited for the release of inflation data to get clues about the direction of Federal Reserve interest rates. The yen was 0.1% weaker against the dollar, reaching its softest levels of the month despite joint intervention by the US and Japanese authorities.

The main focus this week is on the US inflation data due later today for clues to Fed interest rates. Last week's softer-than-expected jobs report and a press conference by Fed Chair Kevin Warsh did little to dispel doubts about rate hikes. Analysts at ING wrote that there is a path ahead for easing in inflation as oil prices remain contained and the Strait of Hormuz reopens.

The US dollar index was up 0.1% at 99.89, with traders split on the Fed's next move. Fed funds futures imply a 50% chance the central bank will leave rates unchanged versus the same probability of a quarter-point increase.