Markets will also look to a speech and press conference by one of the Bank of Japan’s two deputy governors, Ryozo Himino, on Thursday for clues on the likelihood of a September rate hike and the size and scope of any tightening path thereafter.
The U.S. Commerce Department data showed overnight that the Personal Consumption Expenditures Price Index increased 3.7% in the 12 months through July, unchanged from June and slightly above the 3.6% estimate of economists polled by Reuters. On a month-on-month basis, PCE rose 0.2% versus the estimate calling for a 0.1% increase, after falling 0.1% in June.
The reading on inflation kept the market’s expectation for a Fed rate hike by year-end live, though Chairman Kevin Warsh’s upcoming speech at Jackson Hole “will be the ultimate test,” Westpac economist Ryan Wells said in a note.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.21% to 99.13, its highest level since August 19.
Against the yen, the dollar traded at 159.23, having given back most of its intervention gains but still well off a multi-decade low of about 164, with traders awaiting Himino’s speech due at 0130 GMT.
“In a speech shortly before the rate hike at the January 2025 meeting, Himino said policymakers would ‘discuss and decide whether to raise interest rates,'” Mitsubishi UFJ Bank senior analyst Akihiko Yokoo said in a note. “If similar wording is used this time, it would likely be taken as signaling a strong possibility of a rate hike at the September meeting.”Still, Yokoo added that active yen buying is likely to remain limited with Himino and Warsh due to speak.
Money markets are pricing in an 87% chance of a rate hike by the BOJ next month, according to data from money market broker Totan Tanshi.
The Canadian dollar held steady versus the greenback at C$1.388 per dollar. U.S. President Donald Trump said on Wednesday it was “time to teach Canada you can’t do this anymore,” just days after trade talks between the neighbouring countries broke down.
The euro traded at $1.1655, while the British pound was steady at $1.3592. The Australian dollar strengthened 0.18% versus the greenback to $0.7181 and New Zealand’s kiwi gained 0.1% at $0.5948.
In cryptocurrencies, bitcoin rose 0.55% to $78,874.60. Ether was up 1.07% to $2,498.35.
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