Dollar Posts Fastest Gain in Four Weeks Following Inflation Data
The Bloomberg Dollar Spot Index rose 0.3 percent as the likelihood of a Fed rate hike strengthened. Stagnant consumer spending, however, led to giving back some of the gains.
The dollar achieved its strongest gain in four weeks as the personal consumption expenditures price index released in the US met expectations and signaled that inflation pressure persists.
PCE Data Showed Inflation Pressure
In the US, the personal consumption expenditures price index recorded a 3.7 percent year-on-year increase in July. Pointing to nearly double the central bank's target, this data revealed that inflation concerns continue.
Nathan Thooft, an official at Manulife Investment Management, stated that the released data were not overly strong but reminded investors that inflation has not completely disappeared. Following the figures, the probability of a rate hike next month rose to approximately 40 percent in the markets.
Dollar's Standing Against Global Currencies
The dollar gained value against almost all G10 currencies. In Wednesday's trading, the New Zealand dollar and the Swiss franc were among the currencies that lost the most value.
The Japanese yen also suffered losses against the dollar, falling by up to 0.2 percent to the 159.45 level. The increase in US Treasury bond yields was also among the factors supporting the rise in the American dollar.
Consumer Spending and Jackson Hole Expectation
Following strong performance in May and June, inflation-adjusted consumer spending was reported to have remained flat in July. Indicating a cooling in the economy, this data caused the dollar to give back part of its intraday gains.
Investors and market participants are focused on Fed Chair Kevin Warsh's speech on Friday at the Jackson Hole, Wyoming symposium to get clues about the future of interest rate policies.