Dollar Rises, Yen Falls as Markets Await Pivotal US CPI Report Release
Market Movements Ahead of Key US Economic Data
By Karen Brettell
NEW YORK, Aug 10 (Reuters) - The U.S. dollar gained on Monday as oil prices increased ahead of Wednesday's closely watched consumer price inflation report for July, after a much weaker-than-expected jobs report on Friday cast doubt on the likelihood of a near-term Federal Reserve rate hike.
Fed funds futures traders are now pricing in 52% odds of a hike at the Fed's September meeting, down from 67% a week ago. Analysts say slowing job growth and easing oil prices have both contributed to the lower odds of a near-term hike.
Impact of Recent Jobs Report and Fed Expectations
“September was starting to look highly likely and then not only did we get a bad jobs report, but terrible revisions as well,” said Adam Button, chief currency analyst at investingLive.
Upcoming Economic Indicators
Wednesday's consumer price index data could spark another shift in expectations if it points to a reacceleration in price pressures. Producer price data on Thursday and retail sales figures on Friday will offer further clues on the path of inflation.
Analyst Perspectives on Dollar Trends
"Fresh USD downtrends are starting to form following a series of bearish USD catalysts," analysts at TD Securities said in a report. However, "we still expect the USD to stay more supported against G10 currencies until soft inflation data allows the market to price out near-term Fed rate hikes."
Oil Prices and Geopolitical Developments
Oil prices have eased from recent highs on hopes that a deal to end the Iran conflict could be reached, though volatility persists as developments in the region continue to shift. Prices jumped over 4% on Monday after Iran and the United States traded demands for compensation, dimming prospects for a deal to reopen the Strait of Hormuz.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.20% to 99.80, with the euro down 0.13% at $1.1542.
Yen Drops
Japanese Yen Performance
The Japanese yen weakened 0.84% to 159.14 per dollar, on pace for its steepest daily decline against the greenback in almost five months.
The currency has pared back some of its intervention-driven gains but remains well off the roughly 164 multi-decade low touched late last month.
Speculator Activity and Currency Intervention
Speculators slashed their bearish bets on the Japanese yen by the most in over 12 years, according to data on Friday from the Commodity Futures Trading Commission, reflecting the coordinated effort by Japanese and U.S. authorities to strengthen the currency.
The data showed the net short position in the yen fell by $8.865 billion to $3.604 billion in the week to August 4, the largest drop in absolute terms since March 2014.
Meanwhile, speculators increased their net long position in the dollar in the latest week to the highest level since December 2022.
Other Currency Movements
The Australian dollar weakened 0.16% to $0.7056 before the Reserve Bank of Australia's rate decision on Tuesday, with the central bank widely expected to hold its key rate at 4.35% through the rest of the year.
(Reporting by Karen Brettell; Additional reporting by Samuel Indyk in London Jiaxing Li in Hong Kong; Editing by Keith Weir and Nick Zieminski)
