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Dollar rises most in over two weeks after firmer July PCE data
The Bloomberg Dollar Spot Index gained 0.2%, and traders priced about a 40% chance of a rate hike next month.
The US dollar climbed the most in more than two weeks, after the latest personal consumption expenditures price index showed inflation running at a 3.7% annual pace in July, a level nearly twice the Federal Reserve’s target, LiveMint Markets, citing Bloomberg, reported.
The Bloomberg Dollar Spot Index ended up 0.2%, with the move tied to higher Treasury yields and an uptick in rate hike expectations. Traders were left with a roughly 40% chance of a rate increase next month, while a quarter-percentage-point hike was viewed as likely by December.
The dollar’s gains also followed a partial reversal of earlier losses that came after Treasury Secretary Scott Bessent’s surprise announcement last week to step up government bond purchases aimed at pulling down long term rates. LiveMint Markets said that earlier plan had rattled overseas investors and rekindled speculation about the dollar losing ground as a haven and reserve currency.
In FX trading, the dollar rose against most Group of 10 peers, with the New Zealand dollar and Swiss franc among the weakest performers, while the yen slid, falling as much as 0.2% to 159.45 per US dollar. The advance was tempered by separate data showing inflation adjusted consumer spending was flat in July, and investors were looking ahead to a Friday speech by Fed Chairman Kevin Warsh at Jackson Hole for further clues on rates.