Dollar Softer After Inflation Puts Rate Hike in Doubt

The dollar came under pressure in Asian trading on Thursday, after weak inflation data led investors to pare bets that the U.S. Federal Reserve will deliver an interest rate hike later in the session.

The outcome of the two-day Fed meeting continued to grip investors’ attention, particularly after a surprising 0.1 percent decline in U.S. consumer prices in August.

With the Fed firmly in focus, foreign exchange market participants took in stride Standard and Poor’s announcement, which came late on Wednesday in the Asian day, that it downgraded Japan’s credit rating by one notch to A+. The cut brings its rating in line with those of rivals Moody’s Investors Service and Fitch Ratings.

The dollar was trading at 120.54 yen, steady from late U.S. trade and holding above a low of 119.40 plumbed on Tuesday. The euro was also steady at 136.10 yen,.

The euro also bought $1.1291, down slightly, after euro zone inflation for August was revised to be weaker than initially thought, backing expectations of more bond-buying stimulus from the European Central Bank.

Via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza