Dollar Steadies Ahead of Key Inflation Data

The dollar index held around 98.8 on Thursday, pausing its recent decline as investors awaited key inflation figures that could shape the Federal Reserve’s next policy decision. The US producer price index for August is due later today, followed by the consumer inflation report on Friday. Other major economic releases scheduled for today include weekly jobless claims and existing home sales data. Markets are currently pricing in roughly a 60% probability of a 25-basis-point rate hike by the Fed next week following stronger-than-expected jobs data. Meanwhile, Treasury yields surged after the Treasury Department announced plans to buy back up to $6 billion in longer-term debt, three times the usual amount, though the move still disappointed some investors who had anticipated a larger increase. Elsewhere, oil prices moved higher as the US-Iran conflict intensified, stoking inflation concerns and strengthening expectations for near-term rate hikes.

The dollar index fell to around 98.6 on Wednesday, sliding for the third straight session to its weakest level in four months, attributed mainly to the yen’s rapid rise. The yen extended gains as US Treasury Secretary Scott Bessent warned traders on betting against the currency, saying he has “pretty good insight” on what the Bank of Japan will do when he is making a call and intervening with the yen. Investors also braced for key US inflation readings this week that could provide further clues on the Federal Reserve’s policy outlook ahead of next week’s meeting. Markets are currently pricing in roughly a 60% chance of a 25-basis-point Fed rate hike following stronger-than-expected jobs data released Friday. The European Central Bank and Bank of Japan are likewise expected to tighten monetary policy this month. Meanwhile, oil prices continued to rally on escalating hostilities in the Middle East, heightening inflationary risks and boosting rate hike bets.

The dollar index steadied around 98.8 on Wednesday, pausing its recent decline as rising oil prices intensified inflation concerns and strengthened expectations for a Federal Reserve rate hike. Oil prices extended their gains after US forces destroyed five Iranian crude tankers near Kharg Island in retaliation for attempted missile attacks on a US warship. Investors are also awaiting key US inflation data this week, which could provide further clues on the Federal Reserve’s policy outlook ahead of next week’s meeting. Markets are currently pricing in roughly a 60% chance of a 25-basis-point Fed rate hike following stronger-than-expected jobs data released Friday. The European Central Bank and Bank of Japan are likewise expected to tighten monetary policy this month. Meanwhile, the dollar remained pressured against the yen after Treasury Secretary Scott Bessent warned traders against betting on further weakness in the Japanese currency.