Dollar Drifts as Markets Wait for US Inflation Data and Fed Rate Decision
By Gregor Stuart Hunter
Market Overview and Key Currency Movements
SINGAPORE, Aug 12 (Reuters) - The dollar traded sideways in early Asian dealings on Wednesday, shrugging off renewed attacks on shipping in critical waterways in the Middle East, as currency markets awaited the release of inflation data later in the global day.
Major Currency Performance
The yen was flat against the dollar at 159.335 yen, hovering around its weakest levels of the month despite the recent joint intervention by U.S. and Japanese authorities to strengthen the Japanese currency, while the euro held steady at $1.1537.
The British pound was also unchanged at $1.3503. The Australian dollar was flat at $0.7064.
Kiwi Dollar and New Zealand Political Developments
The kiwi dollar was down 0.1% at $0.5876 after New Zealand Prime Minister Christopher Luxon said on Wednesday he had won a confidence vote of ruling party lawmakers, following speculation about his leadership months from a general election.
US Inflation Data and Federal Reserve Outlook
The main focus for markets this week is on the release of U.S. inflation data due later on Wednesday for clues to the direction of Federal Reserve interest rates, as last week's softer-than-expected jobs report and a press conference by Fed Chair Kevin Warsh last month did little to dispel doubts.
Analyst Perspectives on Inflation
"There is a path ahead for easing in inflation as we progress through the remainder of 2026," assuming oil prices remain contained and the Strait of Hormuz reopens, ING analysts wrote. "In fact, the market is already discounting a mild inflation landing."
US Dollar Index Movements
The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was up 0.1% at 99.858.
Commodities and Geopolitical Tensions
Oil prices edged up as trading resumed in Asia on Wednesday, with Brent crude 0.8% higher at $89.61 a barrel after an attack by Iran-backed Houthis on a cargo ship in the Bab el-Mandeb strait and a U.S. military strike on a container ship off Pakistan attempting to break its blockade of the Strait of Hormuz.
Federal Reserve Officials and Rate Expectations
Federal Reserve Bank of Chicago President Austan Goolsbee said on Tuesday the central bank is more concerned about too-high inflation than about any labor market weakness, although it was unclear whether that stance aligned him with the minority of policymakers who favoured an interest-rate hike last month.
Market Sentiment on Fed's Next Move
Traders remain split on the Fed's next move. Fed funds futures imply a 52% chance the central bank will leave rates unchanged at its two-day meeting ending September 16, versus a 48% probability of a quarter-point increase, according to the CME Group's FedWatch tool.
Cryptocurrency Market Snapshot
In cryptocurrencies, both bitcoin and ether were flat at $63,708.64 and $1,881.91 respectively.
(Reporting by Gregor Stuart HunterEditing by Shri Navaratnam)
