New York Forex: PPI Flat, Easing Fed Rate Hike Bets, Dollar Mixed Against Majors

The dollar traded mixed against major currencies on Thursday (13th), as the latest data showed U.S. Producer Price Index (PPI) was flat, prompting traders to further lower the odds of a Federal Reserve (Fed) rate hike in September.

In late New York trading, the ICE U.S. Dollar Index (DXY), which tracks the dollar against six major currencies, edged up 0.02%, to around 99.96. It was at 99.80 before the PPI release.

U.S. July PPI was flat month-on-month, below the market forecast of a 0.2% rise, with June’s figure revised down to a 0.1% decline.

Noel Dixon, Senior Global Macro Strategist at State Street, said the upcoming Personal Consumption Expenditures (PCE) price index later this month should be "quite good" based on its components.

"What I take from this number and yesterday’s number is that it helps justify the Fed holding rates steady in September," he said.

Fed funds futures indicate a 35% chance of a rate hike in September, down from 40% on Wednesday and 55% a week ago.

The dollar rose slightly 0.03% against the euro to 1.1528.

Traders have been watching whether the Fed needs to hike rates to curb inflation, which remains above the 2% target, while Iran’s control over the Strait of Hormuz continues to influence oil prices.

Earlier reports revealed that Yemen’s Houthi movement had targeted a Saudi Aramco refinery with drones, pushing international oil prices up over 3% earlier Thursday, though they later pared gains to less than 1%.

Other U.S. data released Thursday showed a slight increase in weekly initial jobless claims, indicating the labor market remains stable despite July’s unexpected drop in non-farm payrolls. Friday’s retail sales data will offer another glimpse into the strength of the U.S. economy.

The yen weakened slightly by 0.04% against the dollar to 159.48. The yen has given back some of the gains from last month’s historic U.S.-Japan joint intervention, which had fueled market bets on the Bank of Japan (BOJ) accelerating further rate hikes.

"I don’t think this has deterred investors from continuing to bet on yen weakness, unless the BOJ takes action at its September meeting and issues a more hawkish policy guidance," Dixon said.

The British pound fell 0.08% to 1.3481 dollars. The UK economy unexpectedly grew 0.3% in June, driven by falling energy prices, the start of the World Cup, and hot weather.

The Norwegian krone weakened, at 9.51 to the dollar. The Norges Bank held rates steady as expected but noted that inflation has recently cooled.

Norway’s current rate of 4.25% ranks among the highest among 10 developed economies. As an oil and gas exporter, Norway has also benefited from strong energy sector performance this year, supporting the krone.

As of around 6:00 a.m. Taiwan time Friday (14th):

Dollar index: 99.9482, -0.0094% EUR/USD: 1.1530, +0.01% GBP/USD: 1.3486, +0.00% AUD/USD: 0.7059, +0.00% USD/CAD: 1.3931, +0.01% USD/JPY: 159.49, -0.01%